Slightly Outraged

About 6 or 7 months ago I started the process to reclaim charges back from Lloyds TSB for all the times we've gone over our agreed overdraft or had a direct debit returned. Between us Ian and I have 3 bank accounts, and gathering them all together we had over £1000 in charges over the last 4-6 years. So far the bank has given back £750 to shut us up, but over the last two months has charged us £245. I'm going to have to start another claim to get those back. I've started the court process and have a court date for late June, so was interested to read this article on BBC News today about a High Court judge warning the banks to stop messing people around, pretending they're going to defend when they have no intention of doing so.

I knew they were pulling this crap on loads of people, as I've gotten so much help with the reclaming process from The Consumer Action Group forum. Lloyds seems to be particularly bad, so I'm expecting we'll receive the same treatment--they'll wait till just before the court date and then settle with us. The solicitors were supposed to have their court documents to me two weeks ago and still haven't, but apparently this is standard behaviour for them as they don't really intend to go to court. The article says that someone in Bristol has been awarded 80 quid or so because the bank was wasting everyone's time. Just checked the CAG forum and they have a new template for getting banks to pay up for this.

Every once in a while someone makes the argument that all this reclaiming will be the end of 'free' banking, and insinuates that people should just be more responsible and there would be no problem. First of all, I AM responsible, for the most part, with my money. Ian can tell you, I obsess over Quicken and track things to the penny. The simple fact is, we don't have a lot of money to spare, so we don't have a 'buffer' for emergencies/mistakes/impromptu celebrations/gifts/anything. We have a budget. We do our absolute best to stick to it. Every time I read articles about how to manage money, I find that I'm apparently doing all the right things. The particularly silly articles in women's magazines that tell you how to save money irk me. Their suggestions for how to save money are usually "skip your morning latte", "pack your lunch instead of buying", and "get lower-maintenence highlights on your next visit to the hairdresser". I never had a morning latte to skip, I already pack my lunch most days (and when I buy, it's cheap), and my hair colour is from a box. I don't even pay for haircuts--my friend cuts it for free, and in a pinch I cut it myself. Not once have I read anything there that is relevant that I don't already do.

So back to the 'end of free banking'. It's not really free. It has to be paid for somewhere. Currently they do it by charging extortionate amounts to the people who can least afford it. People like me and Ian who can't afford to pay £145 in one month because of a mistake in transferring money between accounts (6 direct debits bounced in that little fiasco). Note that most of our charges were during the time that we actually had a fee-charging account. We were paying £10 per month, per account already, and then an average of £200 per year on top of that. We've cut back to the basic 'free' accounts now. On the CAG forum there are loads of stories of people like us who struggle to make ends meet. Lots are way worse off then us, and the excessive and unfair bank charges make it even MORE impossible to make ends meet, making it more likely they will go overdrawn and incur more charges, etc. etc. lather, rinse, repeat. It's a vicious cycle. Is it morally fair, and more relevantly, is it legally fair to make profit off of this?

Legally, the banks are in the wrong. They know it. That's why they've paid out milions of pounds to shut people up. They don't want a test case because they will lose. There are two relevant facts. If they call it what it is, a 'penalty', it has to be a genuine estimate of losses incurred by a breach of contract. Studies estimate that it only costs the banks £2 to deal with each instance of a returned direct debit or unauthorised overdraft. They charge around £30, 15 times more than their loss! Banks try to get around this by calling their charges a 'service'. The law says contract terms, including charges for services, must be fair. This clearly isn't. That is why they won't go to court to prove it. A test case settled in the consumer's favour would force banks to do what the credit card companies have had to do: lower their charges considerably. Even while thousands of people are getting their money (plus court costs and statutory interest) back, thousands more aren't doing a thing and continue to pay these charges. Just a few months after depositing a 'goodwill gesture' of £750 in our account (without asking us), Lloyds has taken £245 of that back in further charges. They hope we won't fight back.