By: banking fees are up to me — Counting On Currency

banking fees are up to me — Counting On Currency — Mon, 30 Nov 2009 13:37:37 +0000

[...] from Nicole’s post about the choices US banks are facing in their replacement of overdraft fees comes news from UK [...]

By: DanL

DanL — Fri, 27 Nov 2009 02:03:58 +0000

UK – overdraft ruling saves banks £2b 11/26 Daily Telegraph Britain’s banks will be more than £2b richer as a result of the Supreme Court’s surprise ruling that their overdraft charges are not unfair. Lenders were facing a raft of claims if the original ruling had been upheld. More than 1.1m bank customers had hoped to recover an estimated £1.7b before all payouts were frozen 2 years ago when the court case was launched. Some £560m had been returned to customers & further claims were expected. ‘Overhanging the shares was the fact that there would have been quite a number of retrospective payments going back to 2001, perhaps even longer,’ said Richard Hunter, head of UK equities at Hargreaves Lansdown. ‘It’s something the banks could do without given the current economic situation.’ He added that the repayments could have run to ‘billions of pounds’. The ruling means few customer claims are now expected to be successful. However, Lloyds Banking Group confirmed it will review claims from customers in financial hardship but reject others. The British Bankers’ Association said members will work to ensure customer complaints are resolved quickly. ‘We recognise this issue has been of real concern & we are pleased that this decision now brings clarity for all parties,’ it said. There had been fears that a decision against the banks would have led to the end of Britain’s 24-year-old system of free banking for those in credit. Hugh Evans, law firm DLA Piper, said: ‘The ruling is obviously good news for the banks. It is positive for consumers who manage their accounts properly – the banks are now unlikely to scrap free banking.’ 12m people regularly incur unauthorised overdrafts, which subsidise ‘free banking’ for those who do not exceed their overdraft limits. The Office of Fair Trading, which brought the test case, has claimed penalty fees on unauthorised overdrafts generate £3.5b for banks each year. It argued that charges of up to £39 do not reflect the banks’ administrative costs, estimated by some at just £2.50. In anticipation of an unfavourable ruling, banks have been overhauling business models. Unauthorised overdraft charges have been reduced by all lenders & almost ½ of all current accounts now charge a monthly fee, compared with 1/3 in 2006. Britain’s current account system is unusual in that cash management fees are extremely low as the cost of running the majority of Britain’s 54m accounts is subsidised by penalty fees. According to a report by CapGemini, ½ the cost in the UK comes from ‘exceptions handling’ compared with around 5pc in North America & the eurozone. Evans added: ‘This is a brave decision by the Supreme Court & a reminder that there are boundaries to consumer rights. The case is a massive blow for claims management companies.’

Comments on: New Overdraft Regs Are Coming — So What Do We Do About It?

By: banking fees are up to me — Counting On Currency

By: DanL