The Student Loans Company’s rates change in September based on March’s RPI; if next month’s figure drops from the current 0% and goes negative, those who started uni pre-1998 – currently paying 3.8% – will see their loan SHRINK.

Yet the govt. hasn’t confirmed if the same’ll happen for post-1998 student loans: these rely on both inflation and are also linked to interest rates, and therefore have already dropped to 1.5% (full explanation: student loan repaying guide).

I wonder if this delay is a wait and see what the RPI for March is before it decides. Perhaps if in March RPI is -0.1% or 0.2% it will confirm that post 1998 university starters (who form the majority) will also see their loans shrink – that’s great PR to start with. Yet if RPI is -3.0% the cost will be too high and it will change the system, or argue it should match interest rates.

Comment and Discuss

I’ve just travelled back from the FSA’s Canary Wharf headquarters, where I was invited to watch and speak at a meeting of its consumer panel, by acting Chairman Adam Philips. The panel’s charged with working to ensure FSA regulations work in the interest of UK consumers. Not an easy task, as of course consumer views span a broad range.

It’s been something we’ve been trying to arrange for a long time, and sadly has had to be cancelled by both sides as things have cropped up; so it’s great I finally made it, and the discussions were very productive.

In the past some people have suggested I apply to be on the panel (if they’d have me). There are many people I’ve worked with and have a great deal of respect for on it, such as Nick Lord, and a fellow journalist, Scam fighter Tony Hethrington, (see the full panel membership) but my view (as I echoed today) is that MSE is a campaigning website on things like Bank Charges and PPI. Thus, sometimes I disagree with the panel, for example on the hold on bank charges, and I think it’s better to stay free to keep MSE views, but also work in concert when possible.

A whole host of issues came up today. As well as the obvious big campaigns, here’s a few others, big and small…

• Claims Handlers: We discussed the growth of claims handlers for reclaiming. While they’ve been around a while, the worrying trend is those companies charging up front for reclaims which are very unlikely.
• Savings Rates: The fact even web-based savings accounts don’t list your current rate of interest – you need to search for it amongst a host of other rates. Surely in the modern technological age this can be done. Is it not done deliberately to add confusion? This is something I want to do some work on, but I’m still mulling the best way to approach it.
• Irish Protection Issue: As I’ve mentioned in past blogs, there’s a problem with the Irish protection system. Many people got accounts out being told, as the prevailing wisdom was, that the first £50,000 of any savings was protected by the UK FSCS. Now it turns out that this is wrong and all of it is protected by the Irish system. In the unlikely event there were to be a problem this would be a horrid issue. Remember we’re talking Post Office savings here amongst others, as it’s owned by an Irish bank.
• Insurer Stability: Another ‘future proofing’ issue, is one of the stability of the big insurers. We’ve seen problems with the banks, but not a big UK insurer as yet. This is another issue for the Financial Services Compensation Scheme and its important to see exactly how it would and could be handled. See Safe Savings for a further explanation.
• Setting Off. This is something I’m writing a note on for the weekly email next week. It’s where a bank is allowed to take money out of your account to pay off other debts with it, and sadly activating that clause is becoming increasingly common. In many ways this is a great example of how I hope sites like MSE can work symbiotically with the consumer panel. My suggestion will be the practical one for people who are struggling to separate their bank account from their debts: moving to a new bank. Then it’s hoped that on the other side the panel will be able to lobby the FSA, to tell it this is something that must be strongly looked at under the Treating Customers Fairly rules.
• Pensioner Poverty. With savings interest dropping rapidly there’s a big worry for those – usually older members of society – who rely on it for their income. Add this to the country’s aging demographic and possibly less tax revenue to pay out of the social security pot for pensions, and there’s a big potential problem. One of the worries is the reticence of some savers to use their capital, even if we get to a deflationary environment (see an explanation at the top of the weekly email of 18 Feb 2009), so perhaps an education process is needed.

I also offered the panel space in the forums, without any MSE interference (barring usual forum rules), so it can consult with consumers on specific issues – something I think and hope it’ll take up.

Overall it was a really useful meeting. I hope they feel the same.

Comment and Discuss

Last Thursday was another huge day for bank charges reclaiming. The Court of Appeal rejected the banks’ attempt to overturn last April’s High Court ruling that bank charges are subject to fairness laws. (See Bank Charges Court of Appeal, Bank Charges News, and Bank Charges Reclaiming for more info).

Yet nothing works in isolation: alongside those chomping at the bit to get their unfairly taken cash back, there are people who worry about the bigger impact. I thought I’d jot down my thoughts, though of course having campaigned on this for three years, do remember I’m a touch biased.

Is this the end of ‘free banking’?

Last week straight after the announcement, Moneysupermarket and a couple of others put out press releases saying something like ‘the end of free banking’. Now this is nothing new, I remember drawn out arguments on this when reclaiming was in full flow; you can trace many of them back in the forums and my past blogs (like these two blogs from 2007 & 2008: “don’t blame reclaimers” and “it’s not the end of free banking”.)

Yet I’ve never taken this stance. While of course I understand the ‘it’s not right that people who have abused their bank accounts should get this money back and those who have behaved rightly will need to pay for it’ argument, for me it’s the banks who’ve abused accounts through a systemic, unlawful abuse of customers who go beyond their limits.

Here’s the reasons why I still don’t think bank charges reclaiming will kill ‘free banking’.

• We don’t have free banking. We’ve ‘fees-free’ banking for in-credit customers; ask anyone with an overdraft how ‘free’ it is. Even those in credit are paid pitiful or no interest on money the bank then gets to lend out for others in the form of credit cards or other debts at huge rates.
• It’s mismanagement, not bank charges that’ve really hurt. Even if £3bn is paid out, repaying every bank charge for years, this is a fraction of the taxpayer’s bill for bailing out banks. If anything sees off ‘free banking’, it’ll be SHAMBOLIC management decisions that cost hundreds of billions of pounds and caused record losses. In context, bank charges reclaiming is small change.
• The market is too competitive. For those who’ve managed their accounts within their limits (always the best way) the market place is generally still amazingly competitive. You can currently get £100 for signing up to a new account, plus free travel insurance and an interest free overdraft, or alternatively you can be paid £5 a month just for being in credit (see best bank accounts for more info on all these). Why would a bank risk haemorrhaging customers by charging a fee?
• Banks ALWAYS add charges. Banks are always adding stealth charges to everything; both before, since and I’m sure, after bank charges. Whether it’s additional loads for foreign exchange spending, paying to change your address, or even if they launch charges for going to the loo in branches – their job is to make money from us. Bank charges reclaiming may be a big cost, but they’d try just as hard to add whatever charges they can on, with or without it.
• IT HASN’T HAPPENED! Of course I could add “it hasn’t happened yet”, but in truth bank charges reclaiming has been around three years now. Over £1 billion is thought to have been paid out, and the banks have at the same time (though not caused by it) collapsed, yet STILL we haven’t seen the end of ‘free banking’.

Is a payout good or bad for the economy?

Another more recent argument against bank charges reclaiming is “it’s taxpayers money”. Well, from my perspective that’s even more reason the banks need to be obeying the law rather than a justification for them breaking it. Yet also remember our money is currently sitting in the bank’s safes, and there’s a struggle to get them to unlock any of it and lubricate the economy.

Now imagine billions taken out of banks’ safes and into the hands of rightful owners for them to spend, save or pay off debts; what a stimulus to the economy in times of need. Exactly what everyone’s been calling out for.

I only wish they’d hurry up.

Comment and Discuss