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(no subject)
2012
unknownj
The Daily Mail is not journalism.. Rather, it is some work of low brow pulp fiction, based loosely on real events and situations, but situated firmly in the realms of the imaginary.

"The days of credit card companies forcing customers to pay over the odds for missed payments should be coming to an end thanks to a recent Office of Fair Trade ruling."

This is roughly true. But losing revenue on charges (which is used to recover money lost to credit impairment) just means we'll start:

a) charging higher interest
b) charging an annual fee to use the card
c) being more fussy about who we accept for credit

And not one of those benefits the customer, or is a variable within the customer's immediate control. The OFT have taken a source of revenue that penalised customers based on their own choices, that the customer could manage around, and forcibly redirected it to all customers. Good job!

"Its decision that card firms were unfairly charging customers will also impact on 'unfair' account charges by banks and building societies."

Not necessarily. The throwaway remark about bank charges in their ruling wasn't binding in any way, and a lengthy period of review would be entered into before anything actually happened.

"The OFT gave companies until the end of the month to respond to its the ruling, which while specifically applying to credit cards, will also affect unlawful penalties on bank overdrafts, mortgages and bounced cheques."

Creative hidden use of future tense here - the word "unlawful" only applies if that is the view of the OFT in a binding decision. The penalties are not currently unlawful, yet the Mail suggests that they are, and that they must be dealt with.

"When a person opens a bank account or takes out a credit card they enter into a contract. Bank charges for going overdrawn or for bounced cheques are the equivalent of a charge for breach of contract, known as liquidated damages, and the courts can enforce payment. However the sum must reflect actual costs incurred and not exceed damages the bank suffered due to the breach of contract, otherwise it becomes a penalty, which is unenforceable by the courts."

Incorrect! This from our MD:

"Current account charges do not relate to a breach of contract but cover the cost of the service that we provide when we, for example, agree to increase a customer’s overdraft limit or carry out the administrative process associated with returning a cheque."

That's right.. it's not a charge, it's a bill-able service.. As such, it's not a penalty, it's an account feature, as stated in the terms and conditions of the account. Which is legally sound.

It's interesting that they should seek to reduce the amount of money banks make on current accounts, given that in general a current account itself does not generate profit in the first place. That's because this is one of the only countries in the world where customers do not have to pay a fee in order to hold a current account, and we pay the cost of: issuing debit cards, enabling cash machine withdrawals, performing balance enquiries, issuing statements, sending out cheque books and supporting the cheque infrastructure, providing internet banking, 24/7 telephone banking and weekly balance and transaction updates via text message. And we run almost 2,000 branches, fully staffed. Your average customer pays nothing for this service, and we make sod all off their contribution to our capital that we can invest.

On the other hand, looking at a simple Wells Fargo cheque account.. $5 per month to have the account, $1 per month to have unlimited debit card use, etc.. It also costs money to pay bills automatically with it, from what I can see.. Is this the scenario that the Daily Mail envisions for the future, once banks can no longer charge customers for going overdrawn? If not, how do they propose we keep branches open?

Why does nobody ever look at the bigger economic picture?

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