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.