Rhia's attempt at 1990s charges

[prelude2a]

subbing

[Rhia]

Having to put this on hold for a while due to family issues. But as soon as possible will come back to it though it may be after Christmas I fear.

[BankFodder]

This bank clearly wanted him out of business. He had just 3 penalties in 88/89 but in one year I have counted nearly 100 - must be a record. there are such random charges as £40 for a bounced cheque...15 years ago! They seem to have been making it up as they went along.

 

 

You might be very interested to read this report:- REPORT ON INVESTIGATIONS INTO THE AFFAIRS OF NATIONAL IRISH BANK LIMITED AND NATIONAL IRISH BANK FINANCIAL SERVICES LIMITED

Which you can find, for instance, here:-

Office of the Director of Corporate Enforcement

 

The whole thing is worth speed reading through but especially this page found in this section here (read the whole section) :- http://www.odce.ie/GetAttachment.aspx?id=156e09e6-d9cb-44a1-b245-555142c38eaf

REPORT ON INVESTIGATIONS INTO THE AFFAIRS OF NATIONAL IRISH BANK LIMITED AND NATIONAL

IRISH BANK FINANCIAL SERVICES LIMITED BY HIGH COURT INSPECTORS MR JUSTICE BLAYNEY AND

TOM GRACE FCA APPOINTED 30 MARCH 1998 AND 15 JUNE 1998

_____________________________________________________________________

... Fees to be Applied Report and picked out the customers who, from memory, they considered should be charged, and set about determining what the charge should be. Their view of the procedure was that it was a guesstimate, unscientific, arbitrary, crude and clumsy. As regards matters which were taken into account in deciding which customers to charge, and the amount of the charge, the following is a summary of the evidence, which the Inspectors accept, of the managers interviewed:

• Business customers bore the brunt of the charges, particularly those who were regarded as “troublesome”.

• “Troublesome” personal customers were also charged.

• The charge for the previous quarter was the guideline. The current quarter’s charge would either be the same or slightly more.

• The charges were target driven. There was pressure to increase fee income.

• The branches were required to recover 125% of customer cost. (Interpretations of this requirement varied, and its application was limited in practice).

• Consideration was given to the level of charge the account could bear without the customer querying it.

Bank manager interviewees indicated that while the IR£10 per hour (later, IR£25 per hour) charge was applicable to the time spent in servicing customer accounts, no detailed workings were prepared to support the application of this composite rate to time spent.

As evidence of the subjective and random nature of amendments made, managers confirmed that if for any reason the amended Fees to be Applied Report were destroyed, and it was necessary to repeat the adjustment exercise, the revised charges to individual customers would probably differ from those determined in the first instance, though the total uplift would in all likelihood be the same or very similar to the original total.

 

 

 

Bank branch staff evidence

 

Illustrative extracts of evidence from present and former branch managers and staff on how the system operated at branch level, which the Inspectors accept, include:

 

 

Well, there was no rule of thumb, it was kind of a guess figure, you know.

 

It was a guesstimate.

oooOooo

It would have been relative to the last quarter. ….

oooOooo

Well, it [the hourly rate of £25] would have been at the back of our head … I didn’t apply, I didn’t have a scientific rate. As I say, there was just a guesstimate that £100 would cover my time. …

oooOooo

A guesstimate, yes. It was my best, I wasn’t being dishonest, I wasn’t trying to load people or anything. It was my best guesstimate on what time I had spent or [my assistant] had spent or how troublesome this account was. It was a best guesstimate.

oooOooo

Well, I would have sort of thought what sort of nuisance has he been over the previous period and come up with a figure.

oooOooo

It was, at best, a decent guess as to the level of how the fee should be increased. …

Inspector: … would you have been conscious of the target that had been set for the branch in relation to charges?

Manager: Honestly, yes.

oooOooo

Well, fees there was no sort of organised – well structured way of collecting what we now call administration time in dealing with customers. So fees would have been added on if it was a troublesome account at each quarter.

oooOooo

… the bank never really had a system where management time was to be charged other than the fact that we were told to obtain 125% cost covered. …

There was no basis really. It was really just how much trouble you had with that account during the previous charging period, and it could have been as simple as just adding £10 or £5. There was no real basis, it was just depending on what happened.

oooOooo

Truthfully, I would say there was a lot of guesswork done on troublesome accounts, put on a bit here and there. …

There were a lot of things omitted from it that the system wouldn’t pick up but there was no proper system in place to record things that should have been ....

 

 

This report refers to banking practice of a major Irish bank at the same period of time as that with which you are currently dealing for your friend.

 

I can't imagine that this bank was at all out of step with general banking practice in the UK. Just that they got caught out.

[Rhia]

Great Scott BF! This is extremely interesting and big thanks for it. I wonder if similar reports exist for UK banks. Will investigate.

[underdog13]

Fascinating report, BF.

 

Hope you do find similar reports for UK banks, Rhia - best of luck:)

[MARTIN3030]

I think we have seen the ones of interest already-Cruickshank/Competition Comm and one or two indi ones.

I am still trying to get copies of the reports done by Notts University-prelim info suggests they were pretty damning.

[Rhia]

Even more thanks - have Cruickshank do you have any links to the others you mention? I am stunned by the Irish stuff because this supports exactly the view I had taken after looking at the papers.

Edited October 15, 2009 by Rhia