Thread: The Lie Confirmed in The Guardian

Here is an excerpt from Friday 7/04/06 article in The Guardian by Fiona Walsh
Quote
A senior executive at one of the big four said: "We would take a bit of a hit on credit cards. It's £20m to £50m tops for most lenders and it's not the end of the world. But if the same ruling is applied to overdraft charges, then we're talking hundreds of millions each and that's serious.

"The reason we can offer free services is because of the charges. We are going to have to look at whether we can economically continue to offer Free Banking. The OFT decision is probably the first step towards annual or monthly charges for accounts."

Claire Whyley, deputy director of policy at the National Consumer Council, said: "Charges imposed by banks were not intended to make them profits. They have now been told they can't make charges for costs they don't face. We don't see how this should impact on the availability of free banking." unquote.

Now the truth is coming out. If the banks were breaking even on their "delinquent
account" charges, as they claim, then there should have been no money available to offer free banking.

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We need to nail this lie that it is impossible to bank in other countries without paying a monthly fee. You can for example bank in the US with a fully functional account without paying a fee. Rather as in the UK now you can pay if you want an account with extra features but you don't have to.

My suspicion is that when the banks are beaten on penalty charges they will operate in their normal quasi cartel like way to impose more or less universal monthly charges and lo and behold, they will make more money out of doing than they did under the current penalty charge regime. Quite how we head that one off at the pass I don't know.

In that event (paid banking) I wonder how it'll affect those who'd rather not have a bank account but are forced to because of salaries and benefits being paid in direct? I mean how can you force someone to not only use a bank, but pay for it as well, especially people on low incomes....

Natwest already levy charges on their Gold Accounts. They offered me a free three-month trial of it. Didn't tell me that "free" meant they'd take the monthly charge anyhow, then refund it at the end of the three months. I don't know if they genuinely would have done that, to be honest, as I went and complained in-branch as soon as I noticed.

I expect that either they'll put charges on all but the most basic of accounts, or one or two banks will break off and still offer Free Banking, forcing the other banks to follow suit to stay competitive.

There is an interesting section in the Oft report that might give the banks cause for concern should they decide to introduce monthly charges. I realise that the OFT was talking about default charges at the time, but maybe Bankfodder could
see if there is a case.
Quote OFT 824
3.23 We consider that in a consumer contract, where the parties are not of equal bargaining power, ANY estimate that included costs which could not be legitimately claimed as damages from an individual in a case brought at common law, and which
made a material difference to the overall charge, is likely to constitute a penalty
in law. Unquote

Not sure if I made myself clear first time. If the banks impose monthly charges because they cannot make as much profit now from charges, could that constitute
a penalty in law?

Is it a penalty if everyone with a bank account suffers it equally? If they levied the charge only against those people who'd fought for their charges back, then it would be, but if it's a universal set-rate charge, then it would be a charge for services rendered.

Point 17.9 of this BBA report states estimates that it costs up to £80 to set up a basic account and £70 a year to maintain it. The report can be found here: http://www.legco.gov.hk/yr01-02/engl.../0102rp01e.pdf

The bottom line is that the charges should have had no effect whatsoever on either the banks profits OR losses. If they are merely charging what it costs them in the first place then they should break even and it would have nothing to do with their profit margins.

The charges are supposedly there to cover the costs only. They are not there to make a profit and should not be used as such. They are not in place to subsidise Free Banking. So the OFT's announcement should have no impact at all on free banking and the banks are now admitting what they have been denying all along - that the charges did make them a profit, did generate an income to them and they now have to plug the gap for the lost revenue that these charges generated by threatening to charge account holders.

Poor bankers.

Lotta

Daily Mail Page 19.

'The Co-op bank's head of financial services, David anderson, said the OFT proposals would leave the industry with little choice but to introduce new charges for current accounts. "UK banks are already the cheapest in Europe and profit margins are very thin," he added.

"If the OFT were to read its findings across the whole of the sector it will unquestionably lead to charging customers in a different wat, and ending free accounts is the obvious route."'

If thats not an admission that charges are being used to make a profit and/or cover day to day banking costs, I don't know what is.

Wish I banked with the Co-op now.

I wonder if David Anderson would like to respond to the article below his own from an earlier post?

lee6370
Quote"The Co-op bank's head of financial services, David anderson, said the OFT proposals would leave the industry with little choice but to introduce new charges for current accounts. "UK banks are already the cheapest in Europe and profit margins are very thin," he added.Unquote

Here is the article that paints a different picture of British banks being the cheapest
and working off very low margins. Oh poor dears-we feel so sorry for them diddums
diddums -dry those tears- don't cry any more. Am I bovvered?

http://www.derbygripe.co.uk/realuk/banks.htm
Quote
Last year the four main high street banks reported pre-tax profits of £8.87 billion - up £1.75 billion in a year. In August, despite widespread job shedding and branch closures, the four reported combined half-year profits of nearly £5 billion. They are proving particularly profitable in retail banking, where they rely on the accounts of ordinary British consumers. The average return on equity in 1998 was 21% for British banks, unheard of in the rest of Europe. Warburg Dillon Read, the merchant bank, estimates that the average post-tax return on equity for French banks in the same year was 10% and 9% for German banks.

The survey reveals that British customers pay huge charges for going overdrawn compared with those on the Continent. The base rate in the 11 countries using the euro is 2.5%, against the Bank of England's 5.25%, but this is not enough to explain the huge difference in borrowing charges. A current account customer at National Westminster pays an effective annual interest of 33.8% for an unauthorised overdraft plus a £3.50 daily charge. IMI-San Paolo, Italy's biggest bank, charges only 12.5% annual interest plus a fixed fee of 0.75% of the maximum amount borrowed. A customer with an authorised overdraft at National Westminster pays annual interest of 17.8%, far higher than his Italian counterpart at IMI-San Paolo, who pays 7.5%. Both banks offer Free Banking to customers in credit.Unquote

So Mr Anderson, I know the figures used in the survey were for 1988, but are you
really saying that the Continental banks return on equity is now HIGHER than they
are in Britain. Or even more laughable, that British banks return on equity is now
Lower than 10%.
In another part of the same article they claimed that whereas Lloyds Classic a/c would have charged £50 for an unauthorised overdraft, certain banks in Germany, Italy and Switzerland would have charged "less than 50p".

Mind you I would have to agree that the behaviour of British banks is probably
the cheapest in Europe.