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Finance News |
Customers Getting Charged Up over Bank Profits
By Rachael Crofts, PA
The envelope on the mat looks harmless enough but inside is an abrupt note saying you have exceeded your overdraft limit, and are being charged £25 for the privilege of doing so.
That is another £25 you have not got, plus interest charges, and then just when it could not get any worse, you open the newspaper and discover your bank is announcing record profits this year.
Figures out today suggest the major UK banks will announce profits this year of £1,000 per second. That’s £60,000 each minute, £3,600,000 an hour, or more than £80 million a day.
Now that is a substantial amount of money by anybody’s standards, and is leading, unsurprisingly, to claims of profiteering at the expense of customers.
But is this yet another example of rip off Britain or simply a business success story?
The banks are quick to defend themselves, pointing out the UK is one of the cheapest countries in which to bank.
According to the British Bankers’ Association we pay “well under half the amount” we would spend on the same services in other European countries.
Moreover, most profits have been earned away from the high street in the form of corporate banking and international business, the industry stresses.
International institutions like HSBC, for example, made only a quarter of its profits last year in UK, with profit per personal customer in its home market standing at around £70.
But these arguments hold little sway with consumer groups who believe customers often find themselves on a one-way street with the banks.
Try, for example, charging the bank for your time as you hang on the phone through a 15-minute rendition of Greensleeves waiting to be connected to an adviser, or what about compensation when they make a mistake with a standing order or a payment?
It simply does not happen. But the potential for the banks to make money out of us seems almost endless.
Overdraft charges; late payment charges; 0870 telephone numbers; cash machine charges, fees for bankers’ drafts; transaction charges, and mortgage and loan redemption penalties in addition to interest charges.
Eddy Weatherill, of the Independent Banking Advisory Service, says customers are being ripped off and tougher regulation is needed to curb unfair practices.
“We perceive a continuing imbalance between good services and good products and the amount of profit engineered for banks.
“At the same time we see the standard of services declining and the profitability of the big banks escalate dramatically.
“Banks get away with murder on a daily basis and treat their customers very shoddily while demanding sky-high charges for inferior products.”
These profits, he says, are the result of “naked greed”.
“The Government made big promises about cracking down on rip-offs but has delivered nothing meaningful. A windfall tax is the only way to make this industry sit up and start to give customers a fair deal,” he warns.
But customers must take the responsibility themselves to reduce the amount they pay in charges, which ultimately fuel the banks’ profits, says Nick White, head of personal finance at the uSwitch.com comparison website.
Complicated products and terms often leave customers open to charges because they fail to understand the complexity of the deal, he says.
By always checking the small print on products such as credit cards or personal loans they can try to avoid hidden charges, he explains.
“Consumers must take the time to research their choice of provider and check any relevant small print, as there is often a huge difference when it comes to hidden ‘charges’,” he says.
“Most of the time, consumers only become aware of additional fees after they have been penalised.
“The reality is that financial services products offered by banks – and their terms and conditions, are often too complex for the average consumer to understand.”
Source: Scotsman.com
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