Banks Reducing Bank Charges
There has been interesting news on the question of bank charges with the announcement by RBS-Natwest that they will be reducing some of their banking charges from the 1st October 2009. From that date the charges will be as follows:-
* Unpaid item fee reduced to £5 from £38 (maximum £50 per month, reduced from £114 per day)
* Paid referral fee reduced to £15 from £30 (maximum £90 per month)
* Guaranteed card payment fee reduced to £15 from £35 (maximum £90 per month, reduced from £105 per day)
* Maintenance charge reduced to £20 from £28
* Unarranged borrowing rate of interest reduced to 19.24% EAR
Announcing the moves, the new CEO of the UK Retail Bank, Brian Hartzer, said: “This is good news for customers, not least because the fees for unarranged borrowing have been an area of ongoing concern for them. As we look ahead there are many issues to consider, but we thought it was time to move this particular customer concern forward by cutting our charges.”
This is a positive move and it is interesting for several reasons. Firstly, the banks have been arguing throughout the last few years that the penalty charges they make are fair and represent the true cost of the additional work involved with dealing with them. So, we must assume from this that RBS has somehow found a way to reduce their costs significantly in relation to these items. If that is the case then the banks shareholders should be very concerned that the Bank has previously been so inefficient that it cost so much for a computer to print a letter.
An alternative view is that the bank expects to lose the case currently under appeal to the Law Lords, now known as the supreme court. It has always seemed that these charges were unfair and the banks were profiting from them and it would be a huge disappointment to millions of citizens if somehow the ruling were to say that the OFT could not rule on the fairness of bank charges. We must await the result of the Law Lords decision expected in the autumn but in the meantime this must be seen as a positive step and a recognition by RBS that their charges were too expensive and in most people’s opinion, regardless of the legal opinion, unfair.
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What’s also detrimental to the consumer is that the FSA Waiver has been extended, allowing the banks to hold off from investigating complaints about bank charges, save for those who are suffering from financial hardship. I have come across many people who have been sucked further into debt by incurring £1000s in bank charges.
I take the view that the banks expect to lose this case and are preparing themselves accordingly.