Interesting background research into unauthorised overdrafts and consumer attitudes from April 2014
5.7.4. Issues arising due to bank behaviour
No respondents in the sample saw the current account provider as responsible for the consumers’ overuse of an overdraft. The fact that they saw the overdraft as an entitlement, and integral to the current account, did mean that they saw issues arising in connection with the overdraft as customer service issues. Not all issues were service related – the key bank driven issues arising out of the research can be seen below:
Available funds – there is no doubt that the presentation of available funds by the banks, as the balance in credit plus the overdraft facility, serves to reinforce the view in the consumer’s mind that this is their money and that they are entitled to use it whenever and however they wish.
Packaged accounts – although consumers are not directly complaining about this, there are comments that it would be very difficult to assess the value and fairness of overdraft charges within a packaged account, as it is so tied up with the account fee (which is in turn linked to all the features of that account).
The raising of overdraft limits – not an issue that worried consumers unduly, but they reported that overdraft limits were quickly raised by banks so that a £200 overdraft facility could quickly become a £1,000 overdraft facility. The assumption among consumers was that as the banks knew about their financial situation to a far greater extent than a credit card company, then they would not raise the limit to a level that the bank thought unsustainable. This trust placed by the consumers in their bank was a striking feature of the overdraft sample
Alerts and warnings – One of the key service related issues which consumers felt providers could be better at was to provide warnings when funds were close to running out, and/or to provide a text alert service giving the account holder time to pay funds into their account to cover any unexpected shortfall
Inconsistent application/waiving of charges – A further area where customers felt customer service could be improved was to make charges for unauthorised overdraft usage consistent across all firms, and for all firms to adopt a consistent policy towards waiving those charges (first offence only), rather than the current subjective approach
5.7.4. Issues arising due to bank behaviour
No respondents in the sample saw the current account provider as responsible for the consumers’ overuse of an overdraft. The fact that they saw the overdraft as an entitlement, and integral to the current account, did mean that they saw issues arising in connection with the overdraft as customer service issues. Not all issues were service related – the key bank driven issues arising out of the research can be seen below:
Available funds – there is no doubt that the presentation of available funds by the banks, as the balance in credit plus the overdraft facility, serves to reinforce the view in the consumer’s mind that this is their money and that they are entitled to use it whenever and however they wish.
Packaged accounts – although consumers are not directly complaining about this, there are comments that it would be very difficult to assess the value and fairness of overdraft charges within a packaged account, as it is so tied up with the account fee (which is in turn linked to all the features of that account).
The raising of overdraft limits – not an issue that worried consumers unduly, but they reported that overdraft limits were quickly raised by banks so that a £200 overdraft facility could quickly become a £1,000 overdraft facility. The assumption among consumers was that as the banks knew about their financial situation to a far greater extent than a credit card company, then they would not raise the limit to a level that the bank thought unsustainable. This trust placed by the consumers in their bank was a striking feature of the overdraft sample
Alerts and warnings – One of the key service related issues which consumers felt providers could be better at was to provide warnings when funds were close to running out, and/or to provide a text alert service giving the account holder time to pay funds into their account to cover any unexpected shortfall
Inconsistent application/waiving of charges – A further area where customers felt customer service could be improved was to make charges for unauthorised overdraft usage consistent across all firms, and for all firms to adopt a consistent policy towards waiving those charges (first offence only), rather than the current subjective approach
Comment