Devils Advocate- why should i pay for your mistakes

[PJ69]

causing them distress??? that's a laugh - I ended up having to leave my full time job after a few months of singledom as I almost had a breakdown due to stress over debt, my dying nan etc and it was 3 months before I managed to get a job to fit in with my kids, so don't tell me that I caused them distress! At the end of the day, if they had charged a sensible fee, what it actually cost them for me to go over my overdraft, rather than rip me off, I wouldn't have had to reclaim - so basically, they brought it all on themselves!

[Nattie]

Banks do not rip off people, they provide a service which has been abused by a lot of people, and now it will have the effect to penalise me, that is not right.

[Guest]

Have you not been into a branch, they have costs and people in place to deal with people who cannot run an account and that costs money. There is administrative costs to provide the service of returning direct debits. You have informally asked the bank for an overdraft, surely you did not think it was free did you?

The bank have chosen to pay in some cases i have heard as a gesture of goodwill, it shows them to be nice chaps and chapesses.

Around ten years ago I worked for the company that printed bills and statements for Vodafone, Orange, Mercury (as was) Calor Gas, American Express etc. I have some old files from back then and from those figures I can tell you that one of our smaller accounts was paying less than 3p per processed, printed, folded, stuffed and sealed C5 envelope. This was a customer who was only sending 20,000 pages per month - so by comparison with some of our other customers, very small.

3p covered the cost of receiving and processing the data, the paper, the printing and the envelope too - so the actual data processing charge was practically negligible - and bear in mind now that many banks do not bother to send letters anymore, so the negligible data processing charge is the only cost they have.

The banks' own greed has led to this - they have seen charges as a cash-cow and for a long time, they got away with it.

The cost of the branches, staff and general and administrative costs must be met by any business, banks are not unique in that regard.

They pay because they know full well that this is money that they should not have taken in the first place. These are companies that have made money their business, they do not give it back without making sure that there is no other way.

[Nattie]

But as a business customer, you would pay a service for an overdraft. The bank start by providing an informal overdraft which you have requested by paying out more than you have. They must charge you for not meeting your part of the contract. Surely you know that if i build Wembley Stadium and it is not completed on time then i must pay for my poor management of time. The fact that you worked in a business 10 years ago does not mean that costs have not risen both staff and and premises.

[Guest]

But as a business customer, you would pay a service for an overdraft. The bank start by providing an informal overdraft which you have requested by paying out more than you have. They must charge you for not meeting your part of the contract. Surely you know that if i build Wembley Stadium and it is not completed on time then i must pay for my poor management of time. The fact that you worked in a business 10 years ago does not mean that costs have not risen both staff and and premises.

They must charge what it costs, they must not make a profit.

They must not subsidise the cost of staff and plant with money from a small number of customers either - yet they do.

[Nattie]

No the banks do not, where are you facts and figures? The bank is providing a service which those who have used it have now turned on their bank because of the media coverage and hype. It is a disgrace because I will pay in the long run.

[Guest]

No the banks do not, where are you facts and figures? The bank is providing a service which those who have used it have now turned on their bank because of the media coverage and hype. It is a disgrace because I will pay in the long run.

Here is a price list from a Data Processing Company.

JOB SET-UP* COST
Data Processing (DP) only £100.00 per job
Suppressions or NCOA re-directions only £75.00 per job
DP and Suppressions together £150.00 per job
*Set-up charges (one charge per job type)
DP RUN COSTS
Import files ......................... ......................... ......................... ... £ 10.00 per each file
PAF Postcoding updating ......................... ......................... ..... £ 2.00 per thousand
PAF address improvement - Consumer ......................... ........ £ 3.00 per thousand
MPS / BabyMPS cleaning ......................... ......................... .... £ 0.50 per thousand
De-dupe - standard - Consumer ......................... ................... £ 2.00 per thousand
De-dupe - multiple file - prioritised - Consumer ...................... £ 3.00 per thousand
MAILSORT processing (Mailsort 1400) ......................... .......... £ 1.50 per thousand
WALKSORT ......................... ......................... ......................... . £ 2.00 per thousand
MAILSORT barcoding (Mailsort 700) ......................... ............. £ 3.00 per thousand
All reports / spreadsheets ......................... ......................... ...... FOC
Add DPS to file ......................... ......................... ...................... £ 2.00 per thousand
Add extra information to file, eg. apply pack codes ................ £ 1.00 per thousand per item
Special processing (eg. merges, splits, weightings) ................ £ 4.00 per thousand
HIT CHARGES - DECEASED / GONE-AWAYS / NCOA REDIRECTIONS
Set-up and run charge for one file - see above - plus.........
Royal Mail NCOA (supply a new forwarding address) ............. £ 0.19 per new address supplied
Mortascreen (deceased suppression) ......................... ............. £ 0.19 per removal - [ 0.38 per flag ]
Bereavement Register / Deceased Register ......................... £ 0.19 per removal - [ 0.54 per flag ]
Royal Mail NCOA (gone-away) ......................... ..................... £ 0.13 per removal
Royal Mail USS (gone-away) ......................... ..................... £ 0.19 per removal - [ 0.34 per flag ]
REaD GAS (gone-away) ......................... ......................... ...... £ 0.19 per removal - [ 0.49 per flag ]
Axciom Purity (gone-away) ......................... ......................... ... £ 0.14 per removal - [ 0.20 per flag ]
Experian Suppression File ......................... ......................... ......£ 0.16 per removal
NSF (National Suppression File [DMA] (gone-aways) .............. £ 0.25 per removal [ 0.20 for DMA Members ]
MPS / Baby MPS (Opt-out of ‘cold’ mailings) ......................... £ 0.50 per thousand checked

Clearly, these are not bank transaction records, but this is very similar computer data and processed in an almost identical fashion. Note the prices - processing is costed per thousand records unless manual data entry is required - whereupon it costs a whopping 25p sometimes!

Therefore, I put it to you, that rejecting a DD or returning a cheque costs fractions of a penny and no more.

The banks make the vast majority of their profits from wholesale banking, that is the financing of businesses and industry around the globe, it does not come from operating personal bank accounts, however, they do not make a loss on personal bank accounts either - that would not be permitted by the shareholders nor is it good business practice.

A Northern Ireland Competition report, published in late 2006, revealed figures contributed by eight banks which showed that about 12% of annual revenue is generated by "overdraft charges." It is not unreasonable to presume that this would hold true for the mainland UK and therefore, it can be deduced that the money made from penalty charges more than covers the costs incurred in dealing with any "problem" accounts.

Furthermore, Graham Beale, soon to be chief executive of the Nationwide building society, has already declared that it is unfair for delinquent accounts to be used to fund free banking for the rest. Another senior and highly respected member of the banking industry, Peter McNamara, said on BBC Radio in 2004 that the charges were used to fund free banking for all personal customers.
These are remarkable statements. At a stroke, they confess the unfairness of the charges and admit that they are profitable, as they fund free banking for those who have fewer problems with their accounts.

Ergo, the bank are not providing a service, they are making a profit out of penalty charges and you will not pay in the long run.

[Bitingback]

Hi Natie,

I have a bit of a problem with the "payment for a service" arguement. Surely if I am to pay for a service I should derive some return from this.

In the case of, for example: Unpaid Direct Debits, by your point I am paying up to £35.00 to be advised that a service is NOT being provided. Where is the service in that?

BB

[Xena]

I am sure that if you had gone to your bank earlier then they would have helped by providing an overdraft

This is not true nattie im sorry. We have our own company and needed an overdraft quickly on our private account as cash flow was going to be dire for a couple of months. The bank would not give us an overdraft despite our business and personal accounts were with the same bank, and they could see that our cash flow would be greatly improved in a couple of months.

So hence the ball rolling on charges!

Xena

[iancognito]

Natty

Banking isn't 'free' and you have completely the wrong end of the stick, for every cheque you write, every DD/SO you pay, every time you go to a cash machine, you should close your eyes, put your hands together and thank God for all the kind people on sites like this who have been subsidising your 'free' banking for years.

Alternatively, if you don't want to pay for your banking, have a chat with your colleagues and ask them what they think about taking a huge pay cut and doing without their bonus's, that way, when the charges bubble finally bursts for the banks, the poor shareholders won't suffer.

[Nattie]

And do you think basic transactions at an ATM are free? And do you think that the bank does not offer the service of not taking you to court for using its money? The Banks are doing a fine job of preventing this cost to the taxpayer(ie ME). And for those mentioning bonuses, we work hard for them saving customers money making them money and giving them piece of mind(bank mantra). No case has been won in court on charges, the banks have---tells a tale really.

[Guest]

What cost to the tax payer? Even in cases where the claimant qualifies for remission or exemption the taxpayer does not foot the bill as the notional fees that are waived are added to the cost of a successful action, so that at least defendants do not benefit, nor the taxpayer suffer detriment, from their opponents' lack of funds.

In protecting access to justice through the system of fee concessions, the taxpayer, in effect, paid subsidies in the last financial year with a value of nearly £23 million for those exemptions and remissions with over £15 million, or 67 percent, of exemptions and remissions in respect of family proceedings alone. In effect, the tax payer funds very little of any civil litigation.

In addition, following the judgment in R v. the Lord Chancellor ex parte Witham, the Lord Chancellor decided that litigants in the county courts and in family proceedings should be placed on the same footing as litigants in non-family proceedings in the Supreme Court.

Mr. Justice Laws, giving judgment in ex parte Witham said "the right to a fair trial, which of necessity imports the right of access to the court, is as near to an absolute right as any which I can envisage". He went on to say:

"Access to the court is a constitutional right; it can only be denied by the Government if it persuades Parliament to pass legislation which specifically - in effect by expressed provision permits the executive to turn people away from the court door."

We all have access to the courts and it is paid for, should you need it to be, by society. Just like schools and hospitals are paid for by society regardless of whether or not you have children or need hospital treatment.

ATM transactions are not free, the machine has a capital cost and it requires service, maintenance and to be regularly filled. However, this is termed a "cost of sales" and the banks can hardly expect to be able to pass this on entirely as you seem to think that they should.

Nobody is suggesting that the banks cannot make a profit, pay their staff a handsome bonus or that they do not offer a service. However, they are making a profit from an area of business where long established tenets of law state quite clearly that any charges levied must be either the actual loss or a genuine pre-estimate of the loss suffered and where they absolutely must not proft - overdraft charges, returned item charges etc are a cash cow for the bank and regardless of any moral outrage you may feel, English law states (and has done for over a century) that this is wrong.

[Delta]

My biggest problem is the fact that the debits take precedence over credits.

My bank would not allow me an overdraft, one month the DD day was the same day as payday, and yes, that nonosecond before they allowed my wages into my account was the time used to 'attempt' to pay my mortgage and stuff, result......4 bounced DD's, then a hefty amount of money going in the account.

When money is managed to the penny, and every penny is needed and accounted for, even on charge of £30 is enough to create a snowball effect, and so the spiral starts.

Why do banks do it this way?

[LuggerBugs]

I think the main problem is, for those literally on the breadline, it only takes one tiny wee indiscretion to start a massive snowball effect that it is impossible to get out of. Even a missing penny can start you on the road to irrecoverable financial ruin.

Unfortunately, the answer to that situation is so often portrayed by the financial institutions as... here, why don't you borrow more money!!!

Carol Vordermann. You're an intelligent woman. Do you REALLY think the answer to debt is, to get even further into debt for the rest of your life? Do the maths, you money grabbing witch. People TRUST you, and you tell them GREAT BIG PORKIES!!!! (No offence Nattie Pig. )

[Guest]

My biggest problem is the fact that the debits take precedence over credits.

My bank would not allow me an overdraft, one month the DD day was the same day as payday, and yes, that nonosecond before they allowed my wages into my account was the time used to 'attempt' to pay my mortgage and stuff, result......4 bounced DD's, then a hefty amount of money going in the account.

When money is managed to the penny, and every penny is needed and accounted for, even on charge of £30 is enough to create a snowball effect, and so the spiral starts.

Why do banks do it this way?

They do it this way because they are in the unique position of being able to. It strikes me and I am sure will be obvious to you that the levying of charges and the manner and frequency of the same is ruthlessly efficient and clearly designed and engineered specifically to generate as much revenue as possible for the bank at the expense of your balance.

When multiple transactions, consisting of debits and credits are applied to your account, the software is written in such a way as to apply debits first, thereby generating charges if your balance is insufficient to cover all the debits. Such charges are then collected, once any credits are applied.

It is quite deliberate and very lucrative. It could work the other way of course, the bank could apply any and all credits first, but if they did, they would not make nearly as much money in charges, would they?