Busted: Bankers and The Global Economy

January 22, 2008

Lawsuit: Overdraft fees ‘core’ to Banking

Filed under: banking, federal reserve, government, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 10:10 am

“Laurence Rabinowitz QC was defending the Royal Bank of Scotland, one of eight lenders accused of levying unfair overdraft charges. Mr Rabinowitz said overdraft facilities are a “core” feature of accounts and therefore consumer law does not apply.”

Unauthorized fees have been the bane to citizen consumers for a long time. It’s nice to see the British are having a look at the way business is done. Interestingly, the bankers consider overdraft fees as a valuable core service. How?

The view of the bankers:
Banks are providing customers with unarranged credit is a “substantial and valuable service”, which is central to everyday banking.

Without the contract, customers would not be able to draw on checks until six days after they had been paid to allow them to clear.

If the possibility of unarranged borrowing did not exist, then debit card payments could not be guaranteed by banks.

Retailers would be forced to phone banks to check every transaction before allowing them to be processed.

Under current arrangements, banks honor payments, even if they are not covered by an account holder’s balance, and then charge the customer accordingly.

Bankers say:
“What the bank is doing is processing payment instructions and providing the customer with credit”

“Barclays has told the High Court it was “throwing down the gauntlet” to the Office of Fair Trading (OFT) over bank charges.” The bankers continue to defend fee practices to customers. The end result if the OFT wins the lawsuit. “The outcome of the long-awaited court case could bring a fundamental change to the UK current account market. If the OFT argument is upheld, it could mean banks and building societies having to return billions of pounds collected from customers over the past six years.”

This sounds like no big deal to American depositors, but nothing could be further from the truth. This lawsuit could well be an acid test for America and other countries as fee charges are questioned and debunked, further dwindling the profits in banking at a time when bankers are reeling from losses. ~ E.M.



  1. My biggest complaint with this overdraft business is depositing money in the bank and it not posting to our account until that night. What good is an ATM to deposite money if it doesn’t post until 10 or 12 hours later?
    My husband, George, and I live on a very small income, and try to keep our bills paid; the banks are a very convenient way to accomplish this. But it really hurts us low income people and takes away the good feeling of living when we have to give the bank our needed monies. Their profits are high and we do good to buy gas and enough food to last out a month. I feel it is truly unfair. The bank we use, Regions, use to have it to where they could refund an overdraft fee it the manager felt it was reasonable, but now they are so greedy they have stopped this—only way they will refund an overdraft fee if it is a mistake on their pare. We have decided to stop all banking and keep our money at home as they did in the “old days” and just buy money orders–not convenient, but at least the bank won’t be getting the monies we need so bad.

    Comment by Bonnie Sprinkle — May 7, 2008 @ 3:02 pm

  2. It’s no laughing matter; banks are being abusive. I am told by a friend who worked at bank that bank policy is to record deposits after they record the checks received against an account, on that day, thus increasing the chance of overdrawing your account. This is intentional, bank study ways to legally cause you to overdraw your account. Furthermore, banks will charge a fee to the receiver of the check as well.

    It used to be that banks wanted your business so that they could use your money to lend it to someone else. This is still the case, however, now they the have found new way to gouge the consumer – fees. What really irks me is that banks want you to believe they are your friend.

    In a recent overdraft incident with my account, Amtrust Bank, the bank I do business at, accrued overdraft charges of $300 and charged the receiver of these drafts a $10 fee, totaling $50, since the receiver’s account was also held at Amtrust Bank. Disgusting right?

    One other practice used to cause havoc with your account is to hold checks. If a check has an out of town routing number (bank could have a local branch, but be based some where else, your funds will not be deposited into your account for 7 to 8 days. With the technologies available to anyone, particularly banks, I find it hard to believe that this is necessary.

    Maybe it time to stand up and not take it any more. Tell your banks you will not stand for it and insist that they remove the charges. In many cases, the bank will remove some of the charges.

    I asked my bank to do just that and they did. After I knew the refunds had been made, I called the bank manager and closed my account. This was my revenge.

    The way I see it is, by leaving my account open, they would continue to benefit from my account and ultimately regain the funds which they refunded. By closing my account they now have to recruit some other poor sole to pay for the refund by spending thousands of dollars in advertising.

    I am not so naive as to believe that I will change anything by action alone, however, if more people stood up to the status quo, things would change!

    Write to your politicians and tell them they must act to protect the consumer’s rights and insist that the already wealthy banks who have reported record earning the last several years stop gouging the American consumers.

    Comment by JS — May 13, 2008 @ 10:03 am

  3. In particular, I dislike banks’ practice of applying debits (charges) BEFORE applying credits (deposits, etc) in order to increase the likelihood of a customer incurring overdraft charges. I obtained some satisfaction by closing my account. I was told, however, that the bank would charge a 10 dollar fee for closing my account…I kid you not. Okay, no problem, I said…keep it open. I then withdrew the balance over several days via ATM (no teller fees), and then asked them to close my account. When they informed me for the $10 fee, I told them to take it out of all the overdraft charges they had collected. Oh, they didn’t like that…but too frickin’ bad. A quick chat with the branch manager fixed that. Now my business goes elsewhere. Not a big victory, but sweet nevertheless.

    Comment by GiGi — September 3, 2008 @ 1:26 pm

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