What would be a fair charge?

I appreciate this site is mainly for the recovery of unfair charges but what would you consider a fair charge for the following:



1)Returning a Direct Debit or Standing Order

2) Card misuse(where a card is used and payment goes through the account taking it further into an unauthorised overdraft)

I am interested to know what other people think would be a fair charge. I know that on another thread someone said a friend of theirs who worked for Lloyds said the true cost of returning an item was £1.20.

Would that be fair?

[Tygermoth]

I would be happy to pay the TRUE and ACTUAL cost - broken down for me in writing.

I would not settle for anything else.

tyger

How would that work in practice? Cost of electricity to return DD(which could conceivably done either automatically or manually). Would the charge be different for someone who had it returned automatically or by the manual push of a button?

I'm simply saying if the bank say that £x is the true cost would you then say to them to give a breakdown of how that was made? And would you actually believe them?

If the bank states a set cost, would that be sufficient? What if another bank has a higher cost or lower cost?
Do you see where I'm heading on this one? How do you quantify a true cost?

[alanfromderby]

Somewhere on the forum - and we are talking a few months ago, a survey was carried out and the general consensus was that £2 was a fair charge.

It is worth having a good look through the OFT statement, as it clarifies what a bank can include within it's calculation - and what it can't. It is also worth remembering that their £12 limit was just a level at which they would intervene.

I really do wonder what their report would have said if it had been produced three months later than it actually was.

I apologise if this seems pedantic, but as I'm sure you're aware that different banks charge different amounts, would the charge be fair if it went up, I'm sorry if this sounds silly but for example, if the electricty bill goes up.
I guess what I'm getting at is how is a fair charge could be calculated? Reason being that under contract law it is between one person and the Bank. Now say a bank has 3 million customers(I know most high street banks have more). Would that cost be lower than say a Building society who would have lower costs?

[alanfromderby]

Yes, I agree that would be the case, and that also reflects the view of the OFT.

I really do suggest you read the OFT report as it clearly lays out how companies should calculate their charges - and that calculation does factor in the amount of customers on its books.

[lookinforinfo]

If the banks do finally put their house in order and charge the correct amount for
unauthorised transactions, it will be interesting to see the differential charges
involved between returning a cheque and a direct debit.

In Australia and the USA, surveys have suggested that to return a d/d costs around
65 cents-though admittedly the surveys are a few years old now. The cost of
returning a cheque was closer to $5 to $6. Rather begs the question as to why
we are charged the same for either breach. "Fair and reasonable"-yeah right.

I expect that the costs here will be more expensive than America and Oz simply
because our cost of living is higher here. Property, fuel, wages, electricity and
gas prices all help to distort our costs.

alanfromderby can you give me a link as i've looked at OFT and cannot find specifics

[alanfromderby]

Press Release:

Current credit card default charges unfair


Calculating fair default charges in credit card contracts (PDF):

http://www.oft.gov.uk/NR/rdonlyres/2...E/0/oft842.pdf

Guide for consumers (PDF):

http://www.oft.gov.uk/NR/rdonlyres/D.../0/oft842a.pdf

Thanks mate but if I'm right from the link this is specifically on CC charges not Bank charges, What about bank charges on personal/business bank accounts?

[alanfromderby]

If you read the first of the PDF documents - this is the final paragraph:



Implications for other standard default charges to consumers
5.14 The broad principles set out in this statement are likely to be relevant to other default charges in standard agreements with consumers, such as those for mortgages, store cards and bank accounts. We expect the banks and other finance businesses to consider the wider implications of these principles, and to bring any similar charges they impose for breach of contract into line with them, where and as appropriate bearing in mind the different legal and practical contexts in which they operate. If appropriate steps are not taken within a reasonable timescale, further regulatory investigation of the position can be expected.

[thewifeandI]

I also think that a bank should only have one penalty action per transgression - currently there can be three penalties incurred by paying an item that exceeds the overdraft limit: -

1. Charge for paying the item - £39
2. Fee for exceeding limit - £28
3. Penalty rate of interest on the overdraft (sometime only the exceeded part) - 29%

And that is without counting the knock-on effect of the loss of those funds on the running balance in following months.

There is no extra cost to the bank associated with paying an item that exceeds the overdraft limit. There is no cost to the bank associated with exceeding your limit, except maybe 50p for a letter. Standard interest rates of around 15% on an overdraft are already in excess of 3x base rate.

Interest rates on borrowings (all kinds) should be capped at base rate plus 7%, with a top rate of base rate plus 10% for unauthorised borrowing by law.

If the transgression is return DD £2.00, and that goes over the overdraft, surely that's a 2nd transgression so £2.00 levied per charging period. It's a tough one to judge.

I throw something else into the mix which is inter related. Some people use their card until it is declined but some retailers have a floor limit, that is when the transactions will be authorised without checking if funds are available. So for example if a shop has a floor limit of £5.00 then even if there are no funds available the transaction will be authorised.

Surely, we're back to financial responsibilty of the individual.

[thewifeandI]

I can't see a reason to charge for being over the limit - it might be a transgression, but there's no cost involved to the bank. The higher rate interest charges automatically kick in (have all banks reduced them to only being applied to the overlimit amount yet?) and make more money for the bank for doing what banks do - lending money. There is only one reason for the overlimit charge - greed!

If the overlimit is caused by the bank allowing a payment through when they didn't have to, or worse still, caused by bank charges, then no other charge should apply to the transgression.

[alanfromderby]

To be fair, there would be a cost if a letter was sent out informing you of the overlimit.

I would also agree with NWSM, in that a charge (at the correct level) would be correct for card misuse, again if this involved the sending out of a letter.

[thewifeandI]

Originally Posted by alanfromderby

To be fair, there would be a cost if a letter was sent out informing you of the overlimit.

I would also agree with NWSM, in that a charge (at the correct level) would be correct for card misuse, again if this involved the sending out of a letter.

As my 'letters', automatically generated and signed by a computer, are then stored on disc whilst an email is sent out to me to alert me to its presence I can say that the total cost is a near 0p as makes no odds.

If your letter, automatically generated and signed by a computer, is then collated, folded and stuffed into an envelope which is put into a mailsorted sack for RM to collect, then the cost will not exceed 50p per item, including depreciation on the plant.

Don't get me wrong, I'm all for the bank recovering their costs, as long as those costs are the TRUE costs and not some figure plucked out of thin air.

[alanfromderby]

Originally Posted by thewifeandI

As my 'letters', automatically generated and signed by a computer, are then stored on disc whilst an email is sent out to me to alert me to its presence I can say that the total cost is a near 0p as makes no odds.

If your letter, automatically generated and signed by a computer, is then collated, folded and stuffed into an envelope which is put into a mailsorted sack for RM to collect, then the cost will not exceed 50p per item, including depreciation on the plant.

Don't get me wrong, I'm all for the bank recovering their costs, as long as those costs are the TRUE costs and not some figure plucked out of thin air.

Yes, that is exactly what I said earlier in the thread - and what is in the OFT report!