There is disppointing news on bank penalty charges today. The OFT have decided to abandon the legal challenge on bank charges fairness. This follows the Supreme Court ruling that said that the specific part of the law they were claiming would allow them to decide on fairness, did not actually apply.

It is a blow for protection of consumers and raises an interesting question. What is the point of the OFT? The title says it all. The OFFICE OF FAIR TRADING. If the OFT cannot rule on what is fair then what is the point of their existence? Either they need to have their powers increased so they are able to rule on what is considered fair or not, or they should be disbanded and the government state plainly that they do not consider it matters whether trading is fair or not.

Prior to this court case the banks paid out millions as refunds to their customers for bank charges that had been applied to their accounts. If the banks believed they were fair charges and they were entitled to them then we, as taxpayers who are now major shareholders in several banks, are entitled to ask why the banks were paying out all these millions of pounds for no reason. If they felt they had a case that the charges were indeed fair they had no reason to repay the charges, so why did they pay out? Surely that represents bad management by the banks.

There are some interesting figures in the documents released by the OFT in relation to their abandoning this case. They say they still believe the charges are unfair but they seem concerned that the legal bill of fighting on could be excessive if they were to lose and be required to pay the banks legal fees. This is undoubtedly true as the banks would spend a fortune on a legal team that was composed of the best legal minds available. That says an awful lot about the legal system in this country. You can only get justice if you have pockets that are deeper than the OFT’s. What chance does the ordinary man in the street have of getting justice when legal fees are such an obstacle?

The OFT talks about the profits generated by penalty charges and shows clearly just how exorbitant they are:-

Paid item and maintenance fees totalled some £1.5bn – which would equate to a return of over 220 per cent on the average balance

A 220% return on the average balance? No wonder the banks fought so hard to retain the right to make so much money so easily.

A lot of people are quick to say that it doesn’t matter what the charge is and that if people are willing spend other people’s money going overdrawn they should pay the price. This misses the point completely.

In many, if not most, cases people are not trying to spend other peoples money. If you phone up the bank and ask them not to pay anything that would cause you go overdrawn they basically tell you to get stuffed. They tell you they are helping you by making the payments. They use the argument that it could be a mortgage payment so they are doing you a favour by paying it. You do not have any option in the matter. They decide to pay and they then make charges on your account. What would be so wrong with giving the customer a choice over whether anything gets paid or not if you do not have the money in your account?

When direct debits go unpaid no money is spent yet the bank may apply a charge of £35 for doing nothing and if it costs the banks £35 to send out a computer generated letter to a customer, as they always claim to be the case, then the banks must be the most inefficient organisations on the planet and their shareholders should be holding the management to account. If it were true why do some banks only charge maybe, £12 for a letter when you go £12.50 overdrawn or £20 when you go £22.00 overdrawn.

People say they don’t want to see the end of free banking and they are fed up with people who want to take advantage of the people who stay in the black with their accounts. What they are not seeing is that they are the ones taking advantage. The free banking is a myth that is only made possible by other people paying for your free account. All those people suffering excessive charges are paying for the cost of your free banking as well as the cost of their own accounts. This cross subsidy is at the heart of the argument.

Is it is fair that people who are, presumably, very short of money should have to pay the banking costs of people who are much better off. It goes against everything we believe about a fair society where the better off help support those who are less well off. Nobody is even asking for that idea to be applied in the case of bank charges. What is being asked is that people should only be expected to pay the true cost of running their own bank account and that is something everyone should consider fair.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

Another year is heading to a close and, as always, this makes us look back to see what has occurred throughout the year and the story of the year is probably the same story as it was last year. The banks, bankers bonuses and the taxpayer support for the banks.

Unfortunately we have no say in the government backing the banks at a huge cost to us and to our children in the future. The banks didn’t deserve such support after their carelessness and stupidity and they should have been the ones living with little food, little heating and bailiffs banging on the door. Sadly, in this unfair world we live in, it is the taxpayer who has to pay to keep them in their comfortable lives.

Meanwhile thousands of people who were more careful are suffering at the hands of the banks as they charge them for everything they can think of, seemingly inventing new bank charges all the time and, no doubt, celebrating Christmas with the cheery thought that the Law has been used to get them out of the problem of their blatantly unfair bank charges. They know the charges are unfair, we know the charges are unfair and even the Supreme court ruling which upheld their case accepted that the charges were at best questionable on the judgement of what is fair. Unfortunately the wording of the law doesn’t allow the OFT to decide what is fair. You would quite reasonably assume that the Office of Fair Trading would be able to say what was fair or not but apparently they cannot.

So here we all are, swamped in personal debts, overwhelmed by government debt and all because the banks greedily kept buying worthless, so called, investments in pieces of paper they were told would be valuable which turned out to be worth very little. Now the banks are doing so well they want to pay big bonuses to their staff? Where is my bonus for keeping your business going and allowing you to have a job, Mr Banker? I don’t want a million pounds. Fifty quid would be a nice little treat thank you very much.

So if there is one message to come out of the last year or two it is this. Stop spending money you don’t have. It doesn’t matter if you are a banker, a government or the ordinary guy on the Clapham Omnibus, as they used to say, stop spending money you don’t have. Stop using credit cards and use cash to buy things, instead. If you don’t have the cash put off your purchase.

Happiness does not come from buying the latest gadget, though the advertisers would want you to think this was the case. Misery does come from excessive debts and financial difficulties. It is far better to sleep comfortably in your bed at night, knowing your bills are all paid, than to have a house full of gadgets and a head full of financial worries.

Contentment comes from within. You cannot buy it and nor can you buy happiness. Don’t be like the greedy and self righteous bankers who think the world owes them a living and they should be able to live on government benefits to keep them in the glorious luxury they think they deserve. They may have the outer shell of a human but a cold and wicked heart lies inside! Instead, be someone who cares about other people, share your happiness with your family and friends and be happy to live within your means.

If we were all to start using cash once again and live by the motto that, ‘When you run out of cash stop spending’, we will all be a lot more content within ourselves. We will eventually find ourselves to be more wealthy thanks to not paying enormous interest charges on everything we buy and even better…. We might get a few bankers losing their extremely well paid jobs if we don’t pay them all those billions in interest charges, credit cards fees, default charges and goodness only knows what other fees and charges they may decide to invent.

Lets begin a revolution, let’s start using real money again and when you run out of cash STOP SPENDING!

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

In my travels across the web today a couple of articles attracted my attention. The first, from the BBC website which is reporting how Lorn Myners reacted to the board of RBS reporting that they might all resign en mass if the government, as the largest shareholder, insists they should not pay out £1.5 billion in bonus payments to their investment banking staff.

RBS are claiming it is their legal duty to act in the best interests of their shareholders and failing to pay out all these bonus payments might cause some of their staff to leave for better paid jobs. Vince Cable, the Liberal Democrat treasury spokesman was typically on the button when he said we should call their bluff.

It’s a shame the government didn’t let RBS go bust and simply buy the remnants for a penny. New contracts could have been put in place and all these bankers who expect to get million pound bonuses should have been grateful to keep a job at a minimum wage.

If the bank staff want to go then good, clear off. We will be better off without you. There are plenty of more than capable people who would be happy to do as good, if not better, a job at half the salary these people are on and not expect to get bonuses for doing the job they are paid for.

Let’s be honest. If we had dragged anyone off the street to run the banks over recent years they could not have done a worse job than these so called, masters of the universe.

The bonus culture in banking was a very significant cause, if not the main reason, the bankers nearly bankrupted the country. They still don’t get it. They still do not understand that they are lucky to have any job let alone a well paid one. They appear to think they are better than everyone else and should be given massive amounts of money because they are so superior. They are not.

You can argue that top rated footballers merit their massive rewards because they are the exception. They have skills that others could never match. There may be some bankers who have talents that are very rare but the majority of their work could be done by any number of bright people. The laws of supply and demand, the very laws of the market that these investment bankers rely on to make all their money, suggest that these people are seriously overvaluing themselves so they should resign and see what life is really like in the real world.

The Cruel And Heartless World Of Debt Collections

The second article I would draw your attention to was in the Independent and it was all about the debt industry, an industry only slightly removed from these same bankers who expect to get millions of pounds a year for doing a job.

The debt industry is booming as other industries and ordinary people struggle with the financial mess we find ourselves in. Most of the banks spent the last ten years trying to encourage everyone to take on more debt and now people are struggling those bankers, who earned so many bonuses for getting us into debt, are now crying because people are struggling to repay the money owed.

We all have a responsibility to repay our debts. We may well want to do everything we can to repay those debts but there are limits to anyones ability to do so and the people who encouraged us to use our credit cards, take out additional loans and remortgage our homes have a responsibility too.

Some would argue that what the banks did was akin to a publican encouraging an alcoholic to have a drink. It is not so far from the truth. The banks were eager to suggest we should visit them for a financial advice meeting and many people did. Many of those people were then treated to a sales pitch and ended up walking out of the bank having taken on a credit card they didn’t want or a loan they felt they hadn’t needed all thanks to the pressure selling of banks and bonuses paid to sales staff for signing customers up for loans and credit cards.

The banks behaved in a totally irresponsible way towards their customers and, as it turns out, to their shareholders and to the taxpayers. We all have to pay the price of their stupidity and greed and yet they still expect to receive million pound bonuses. They should be thankful they are not hanging from lamp posts after their treasonous behaviour. Fortunately we live in a moderate and fair society but they are taking advantage of our fairness and show no sign of losing their greedy self interested approach to life.

So we are now in a situation where there are many thousands, perhaps millions, of people who are seriously struggling with debts. The banks did the selling but we took on the loans and the credit cards and having enjoyed a spending spree lasting perhaps ten years we now have to find a way to pay our debts.

If you have the extra money to pay back the debts there is no problem. Pay them off and move on having, hopefully, learned some financial lessons. But, what about all the others who want to pay their debts but simply can’t afford to repay them at the present time.

The whole debt industry depends on making people who cannot afford to repay what they owe pay even more than the debt they already have. Banks, credit card companies, telephone companies and all types of other businesses sell on outstanding debts to debt collecting companies for pennies in the pound.

How can it be in the best interests of shareholders to sell a debt of perhaps £100 to another company for £30 when the customer wants to repay the full amount of the debt but needs time to spread the cost?

Once the debt has been sold on the debt collections company will demand the full outstanding debt from the original customer and will almost certainly add on additional charges and costs making the situation even more difficult for the customer to resolve.

Problems with one debt lead to difficulties with another and before long the situation is spiralling out of control and it then becomes a fight between different debt collection companies to get their money before anyone else does and before the customer goes bankrupt.

How can this scenario be good for anyone? It doesn’t help anyone except the debt collection agency who manage to successfully collect money for nothing. It isn’t money they were owed for goods or services they provided and it isn’t money they earned. They are the vultures circling the dying man in the desert.

The whole financial industry has become overgrown and sickly. It needs serious pruning right back to it’s roots and then careful training and guidance so it takes shape that is beneficial to society, to customers and to shareholders. It needs to show some appreciation for the taxpayers who have, unwillingly, become the host this parasitic industry required to enable them to survive.

In the meantime it would be in everyone’s interests if there was more support for individuals who are struggling with debt. Whatever the reasons behind the debt, it helps no-one, except the debt collection agencies, for them to be thrown out of their homes and become dependent on the state for housing and goodness knows what else. What they need is support in a way that allows them time to pay and a way of renegotiating ther debt burden.

Most people who are struggling with their debts do want to repay them in full. Honesty isn’t the problem here. The problem is the practical one of finding a way to pay and when the collections company adds an additional charge of maybe £200 on top of an outstanding debt and then demanding immediate payment, it is not going to help someone, who is already struggling to feed their family, pay their bills.

The financial industry would make more profit from helping struggling customers by renegotiating debts rather then selling debts on to debt collection agensices for pennies in the pound. It makes no sense, it is bad for shareholders.

If the government can bail out banks with billions of pounds because they were selfish, greedy and stupid, how come the struggling taxpayer is offered no support, no help and no assistance when that could be done for a few million pounds and save the country hundreds of millions in benefits and support in the future?

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)