Wednesday, 25 November 2009

More Good News For Banks

Bank executives are probably having a few drinks tonight - not just because they are earning fat profits and bonuses again, but because they have found they can continue to profiteer at the expense of those who go overdrawn.

The Supreme Court has ruled in favour of the banks in the feud with customers over being able to charge excessive fees when customers go overdrawn without pre-agreed authorisation. We have all been victim of this at some point when a cheque is late or something, we get some arbitrary sum charged with no real reference to the cost incurred or to our banking history. There seems to be no real standard charging system and then suddenly, in the same month or more, all letters and administration charges can be lumped on you too.

Many bank customers had rightly complained and taken the action to court - I can only hope they had not gone overdrawn to pay for the legal fees as it has taken years to get to this point. But the Supreme Court was swift and damning in its judgement, allowing the banks to effectively charge what they liked so that they could offset the cost of those who do not incur charges.

Banking is one of the few services that you have little or no control over the charging structure and the costs can be as arbitrary as they like. It is now case law that you cannot complain and get compensation - they are allowed to do it.

Given the fact that banks are extracting front and back office staff at an alarming rate, the £2.3bn they earn annually on such fees are pretty essential to their well being. It seems a little churlish that banks would behave this way after all our incredible generosity in bailing them out - some of the bailout we did not even know about as £61bn was secretly stumped up to 'save' Lloyds and RBS last year and the public were not informed until this week. What else we don't know about may well have been swept under a very lumpy carpet.

It seems taxpaying bank customers are being shafted at both ends. We pay excessive fees for going overdrawn and if the banks go 'overdrawn' we totally underwrite their losses. I am sure that in isolation, the Supreme Court had no real choice but to exclude the fact that taxpayers rescued the banking system but in the cold hard business world once again it just goes to show what a dreadfully poor deal taxpayers got for its largess in saving the banking system.

Politicians may think it is petty to negotiate on such trivia but this is really at the heart of the matter - it is everyday people who simply cannot afford to prop up banks when they fail who have been preyed upon by banks with excessive charges. If the individual or collective taxpayer had had the authority to negotiate the bailout deals rather than ministers, civil servants and investment bank advisers, then the shape of the deals, if any would have been agreed at all, would have been very different. If we were to put that much 'skin in the game' we would have expected something in return. Instead we see high risk plans, excessive wages, written down debt being traded again and a new bonus extravaganza.

Lord Myners and the rest of the crew who negotiated all this rubbish were probably far too wealthy to be worried by such details but that was the essence of the whole lackadaisical approach that led to Fred Goodwin walking away with millions when his strategy had actually wrecked a great company.

At a time when the whole country seems to have gone mad enough to want more of this Government, this ruling was a timely reminder of how badly the whole bank bailout affair was handled.

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