Dear Sirs,
Over the next four weeks you have some important decisions to make.
You recently gave the main UK clearing banks a wavier which allowed them to disregard your own complaint procedures and to put claims on hold for bank penalty charges. This might have flown but you (incredibly) allowed the same banks to continue charging while the OFT geared itself up for a High Court test case into the legality of these charges. When the very legality of these charges comes into question, how is it that you allow the banks to keep charging people? A sensible option would be to hold on ALL claims and charges pending the test case. Unfortunately this would have hit bank profits to such a degree that the angry phone calls from them would have been worse than the ones from CAG.
But now you're stirred up a hornets nest. The banks are still not happy (they see the writing on the wall). Customers are clearly not happy. What are you going to do?
Here are your choices:
1. Allow claims to proceed as before (and allow banks to keep charging at current rates)
2. Carry on with the current situation (e.g claims on hold, bank can still charge)
3. Put a hold on all new charges (but continue to keep current claims on hold)
4. As 2. but with clearer provisions for special e.g hardship cases.
Stakeholders reaction to this decision:
1. Both bank and consumers will play ball but the FSA will look a bit daft. Still its better to admit that you're wrong than to let the current situation continue.
2. Total loss of consumer confidence in FSA, FOS and OFT likely. Blowback will last years. Very difficult (and expensive) to rebuild reputation. Hovever banks will love the FSA and you will be invited to many more top tier events and dinners. A career enhancing move (or possibly not if Gordan finally decides he's had enough of sharp practice - not likely really but you never can tell these days).
3. Looks OK on paper - Hovever: Consumers with a claim will not be happy and banks share price will drop 20% overnight. You will make no friends and will never get that plush banking consultancy job when you leave the FSA in a couple of years.
4. At the very least you need to issue specific DIRECTIONS on this issue (not wishy washy guidence and 'Dear CEO letters, references to banking code etc..). However (as you will have already found) how do you define hardship? Much better to just make an accross the board decision. Which leads us to..........
So what do you do? Here is a solution that you might be able to swallow.
PRESS RELEASE: Issue EMERGENCY DIRECTIONS. Saying that after careful review and reflection etc.....the current situation is unfair to customers blah blah blah........in the interests of helping them the FSA orders the following.......
Immediately order all new charges to be no larger than £12 (ideally effective on OCT 1st but by 14th OCT at the latest. Any bank saying they cant implament changes within that timeframe is lying) and allow claims to proceed (e.g remove the wavier) for anything in excess of this amount. This would allow banks to keep the revenue rolling in, but at a reduced rate. It would also allow claims to continue (but at a reduced level of value as banks would seek to pay the difference charged between the old and new rates).
The beauty of this option is that the OFT has already done the legwork. (see:
The Office of Fair Trading: Current credit card default charges unfair ) Remember. This decision was originally meant to apply accross the board. "These principles also apply to default charges in other consumer contracts such as those for bank overdrafts, store cards and mortgages".
Don't be tempted to keep the stay on claims. Its hardly fair that so many people have already claimed when others have been left hanging. Often it is those who most need the money who are currently stuck in the system. Set a deadline for claims to be finished (e.g similar to endowments but set the timelimit at 2 years). Allow banks to make offers to settle for the difference between £12 and whatever they have been charging. This is also a fit punishment for banks who have sought to profit from these types of charges. The banks that charged the most will pay the most back. You could also extend the time banks are allowed to take to process claims (suggest 12 weeks from receipt of claim to payout, not including Data Protection Act requests).
IMPORTANT: You must allow banks to ofer a 'full and final settlement' for claims. Trust me jam today is better than jam tomorrow for most consumers. Most people currently stuck in a claim would take the difference between £12 and whatever they were being charged quite happily rather than wait 5 years"
But wait I hear you say. The legality of bank charges is still in question. What if a court rules that the charges are fair? Well that is unlikely. And if a court does rule that they are fair then it will probably arrive at a figure of £4.50. Banks will welcome an FSA 'fair figure' of £12. All customers could be given a choice of accepting this settlement or waiting for the court case. That sounds like a fair choice to me.
Give directions for banks to proceed with claims in line with the previous OFT ruling (see above). State that the ulimate legality of charges decided in court does not matter as you are instigating these measures in the interests of consumers (I know TCF does not strictly apply to bank accounts, but it probably should and it probably will one of these days, and if you say it does it will). You know that the banks have been breaking numerous aspects of TCF, FSA regs and BBA regs in relation to retail banking. Unfair Terms and Contracts is neither here nor there really. If you are looking for ammo to back up the decision then you already have it.
This will fly with banks and consumers and will also restore consumer trust in the FSA (as an afterthough it might even help the FOS and the OFT). This is also what you should have done at the very beginning. Its the right decision. As a plus you'll even start getting those positive headlines that you love back again.
Adopting the above suggestions would allow banks to put a £ figure on liability and would also put a cap on the time it will take to ultimately resolve. This is in the best interests of consumers, banks and the financial markets. It will also draw a line under the matter. In addition it will also allow the OFT to spend the next 5 years in various courts arguing the toss on Unfair Terms and Contracts. By the time they have finished and a decision has been reached the matter will be over. Whatever the ultimate decision the market will have moved on by then, and so will the claimants, and so will the defendants. Whatever the outcome it will no longer matter and everyone will have time to prepare.
In addition what the UK retail economy could really use right now is an injection of liquidity. What better way than to use the banks to deliver it? If you want to keep balance sheets strong then people need to be able to pay their bills. This will allow them to do just that.
Neither banks or consumers will be overjoyed with this decision but it might be one that everyone can live with. And it will be a hell of a lot better than the current fiasco.
.
Remember: Consumer confidence is everything. The FSA is widely regarded around the world as a 'model' regulator. Don't throw away this position over an issue that has a palatable solution for ALL stakeholders.
You could also grow some balls. Remember - all you have to do is re-write the rulebook and/or issue directions. No one wants this dragged out for years. The FSA can and should be able to find a solution all by itself without the need to go running to the OFT or the courts. The market needs leadership and direction. The FSA has the mandate. But does it have the balls? We will have to wait until Sept 28 to find out.
Yours,
A Concerned Stakeholder
P.S
A NOTE TO THE CLEARING BANKS.
It costs an average of £50-£150 to attract a new current account customer through traditional advertising. At no time in UK retail banking history have you managed to **** off so many people so quickly. OD charges were a nice cash cow while they lasted but you didn't think they were going to last forever, did you? At the first sign of trouble you should have dropped them. Yet the lure of easy cash was too easy. Some banks even designed special software to maximise revenue based on payment dates. It was very clever (for a while) and you wanted to maximise shareholder profit (as is your job). Hovever the landscape has changed hard and fast. If you want the IFA market, if the retail distribution review is going to mean anything, if you want to cross sell, upsell etc then you are going to have to change. An oppertunity exists RIGHT NOW for one UK clearing bank to break the mould and stop charging. Together with the right ad campaign you will literally have people begging to bank with you. Treat them right and they might never leave. In a country where people are more likely to get divorced than change bank accounts you would think this is an oppertunity not to be missed. Now you know you've all drawn up the plans and arranged the creatives. So who's going to go through the looking glass first? Cause someone's gotta be.
An Open Letter to the FSA 
i want my money from clydesdale bank!! all £1600 of it!! 
