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Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

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  • Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

    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
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  • #2
    Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

    Thanks for that , interesting

    Comment


    • #3
      Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

      A customer can REFUSE an overdraft quite easy don't they understand Banks make MONEY from overdrafts that's why they charge interest and fees

      Comment


      • #4
        Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

        Originally posted by wales01man View Post
        A customer can REFUSE an overdraft quite easy
        They can't when unpaid item charges are applied.

        Comment


        • #5
          Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

          I do think the main thing I have seen in the past is that consumers forget that an overdraft can only be taken once, it is just a rolling loan, and should only be used on rare occasions as a safety net.
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          • #6
            Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

            Originally posted by EXC View Post
            They can't when unpaid item charges are applied.

            In defence of banks (eh???) and possibly sounding a little MSE'ish I have never had any issue with an overdraft on my Lloyds basic account. I don't have an overdraft and if I do get a charge of £12 it doesn't take me into any overdraft but comes out when money goes in - therefore its impossible to get charges on charges - and the charge is only £12. The only DD I have set up is for the telephone bill because Virgin require it (they need a slap for that) BUT I usually pay by debit card direct online a few days before it would be called for so its quite unusual I m*ck it up and a DD gets through, bounces and gets a charge.

            But then I suppose I've been quite involved in looking at how the system works and am fully aware of bank charges and overdrafts and the issues they can cause, more so than the average consumer I'd say, so I'm naturally as on top of it as I can be.
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            • #7
              Re: Consumer Credit: Deep dives into Credit cards and Unauthorised overdrafts - FCA

              Originally posted by EXC View Post
              They can't when unpaid item charges are applied.
              Indeed you CAN'T just refuse an overdraft. I have a Barclays business account without an O/D facility, it went overdrawn by over £300 when I wasn't using it for a couple of years or so, all from charges applied by Barclays themselves. The charges accumulated over a period of just over a year, during which the unarranged O/D was never defaulted or recalled (I still use the account) but they just piled on the charges, so when money went in again, it got automatically paid off.

              Some of the charges were for add-ons I didn't even request, however, being a ltd account made it harder to reclaim them, or so I was told at the time.

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