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http://www.timesonline.co.uk/tol/new...cle5908511.ece
BRITAIN’S stricken banks are clawing back billions of pounds lost in the credit crunch by squeezing personal customers with “extortionate” banking fees and higher interest rates.
Royal Bank of Scotland (RBS), HBOS and Lloyds TSB are brushing off the threat of an inquiry by the competition authorities to impose a battery of swingeing fees.
They are also charging interest rates for loans and overdrafts as much as 38 times higher than the bank base rate.
Banking executives are relying on profits from ordinary customers to strengthen their balance sheets. Alistair Darling, the chancellor, faced calls this weekend to intervene to stop banks imposing unfair penalties on ordinary customers to make up for losses on reckless trades.
John Mann, a Labour member of the Treasury select committee, said: “These disgraceful charges are part of a banking culture that wanted money for nothing. Ministers must now say that the greed has to stop and insist on charges and interest rates that are fair and proportionate.”
While some of Britain’s big banks were brought to the brink of destruction by the credit crunch last year, high street banking still generated large profits. The banks, now underwritten with public funds, made nearly £5 billion in profits before tax in 2008 from personal banking customers and small businesses.
RBS, which also owns NatWest, generated income of £4.4 billion in interest on loans and bank deposits on the high street, an increase of more than £200m on the previous year. Banking fees and commission generated a further £2.1 billion.
The banks have boosted their margins on personal loans and overdrafts this year by increasing the spread between the bank base rate and interest charges on mortgages, overdrafts and personal loans.
While the Bank of England base rate has dropped to 0.5%, the interest rate on an overdraft with RBS is still more than 19% - a similar level to March 2008.
The average interest rate on a £7,500 loan over five years from the leading banks is 9.5%, compared with 9.36% a year ago, according to an analysis by moneysupermarket.com, the price comparison website. Over the same period the bank base rate has fallen by 4.75 points.
The banks are also generating hundreds of millions of pounds every year with hefty fees for unauthorised overdrafts, which are imposed even if customers go overdrawn by just a few pounds.
The High Court ruled last month that the Office of Fair Trading (OFT) should be allowed to decide if the fees are fair. The banks stand to lose at least £1 billion a year if the OFT rules against them. The banks - including those bailed out with public funds - will be seeking leave to appeal, but in the meantime are still battering their customers with a bewildering array of penalty charges.
Silas Newman, 18, a gap-year student from Wandsworth in south London, was charged nearly £380 in overdraft fees by Halifax, part of HBOS, after going 45p over his £100 limit.
He started exceeding his limit on January 5, but the first Newman knew of the charges was when he received a letter from the bank two weeks ago telling him he owed £111.
He promptly visited his branch to pay off the debt, but was astonished to be told that it had ballooned to £378. He had used his card 10 times to buy snacks, often costing little more than £1. But because he had already crept beyond the limit, he was therefore liable for 10 one-off charges of £35 for each purchase. He was also liable for an unauthorised overdraft fee of £28.
After his visit to the bank he received three more letters - all dated several weeks earlier and sent by second-class post. One letter stated that Halifax would charge him £10 for every letter it sent to chase the debt, as well as £10 for every telephone call.
The bank has now agreed to waive most of the charges.
Another victim of the penalty fees is Bernadette Mardon, 58, who lives in Cardiff. A £4 direct debit that she makes each month to Guide Dogs for the Blind was rejected by her bank, NatWest, because her account had insufficient funds.
NatWest then told her that she would be charged £198 to pay for halting the direct debit.
Lloyds TSB, now majority-owned by the state, has trumpeted “lower” charges that impose a daily rate for going over an agreed overdraft limit.
Sarah Beckett, 23, a graphic designer who lives near Canterbury, found that the new tariff was still punitive. In one month she was charged £80 for exceeding her £2,500 agreed overdraft limit by about £100 for just four days.
Even customers who do not exceed overdraft limits face additional fees. HSBC charges its customers £25 at the end of each 12-month term of an overdraft agreement.
Bob Egerton, who has supported customers in legal actions against banks over penalty charges, said: “It’s quite clear under consumer law that these charges are unlawful and ministers should intervene.”
The British Bankers Association said increased margins reflected the greater risk of borrowers defaulting. The banks say their customers can avoid extra fees by staying within agreed limits.
Lloyds TSB said that when it introduced the new charges for unauthorised overdrafts it cut the interest rates on its unauthorised overdrafts by two-thirds.
BRITAIN’S stricken banks are clawing back billions of pounds lost in the credit crunch by squeezing personal customers with “extortionate” banking fees and higher interest rates.
Royal Bank of Scotland (RBS), HBOS and Lloyds TSB are brushing off the threat of an inquiry by the competition authorities to impose a battery of swingeing fees.
They are also charging interest rates for loans and overdrafts as much as 38 times higher than the bank base rate.
Banking executives are relying on profits from ordinary customers to strengthen their balance sheets. Alistair Darling, the chancellor, faced calls this weekend to intervene to stop banks imposing unfair penalties on ordinary customers to make up for losses on reckless trades.
John Mann, a Labour member of the Treasury select committee, said: “These disgraceful charges are part of a banking culture that wanted money for nothing. Ministers must now say that the greed has to stop and insist on charges and interest rates that are fair and proportionate.”
While some of Britain’s big banks were brought to the brink of destruction by the credit crunch last year, high street banking still generated large profits. The banks, now underwritten with public funds, made nearly £5 billion in profits before tax in 2008 from personal banking customers and small businesses.
RBS, which also owns NatWest, generated income of £4.4 billion in interest on loans and bank deposits on the high street, an increase of more than £200m on the previous year. Banking fees and commission generated a further £2.1 billion.
The banks have boosted their margins on personal loans and overdrafts this year by increasing the spread between the bank base rate and interest charges on mortgages, overdrafts and personal loans.
While the Bank of England base rate has dropped to 0.5%, the interest rate on an overdraft with RBS is still more than 19% - a similar level to March 2008.
The average interest rate on a £7,500 loan over five years from the leading banks is 9.5%, compared with 9.36% a year ago, according to an analysis by moneysupermarket.com, the price comparison website. Over the same period the bank base rate has fallen by 4.75 points.
The banks are also generating hundreds of millions of pounds every year with hefty fees for unauthorised overdrafts, which are imposed even if customers go overdrawn by just a few pounds.
The High Court ruled last month that the Office of Fair Trading (OFT) should be allowed to decide if the fees are fair. The banks stand to lose at least £1 billion a year if the OFT rules against them. The banks - including those bailed out with public funds - will be seeking leave to appeal, but in the meantime are still battering their customers with a bewildering array of penalty charges.
Silas Newman, 18, a gap-year student from Wandsworth in south London, was charged nearly £380 in overdraft fees by Halifax, part of HBOS, after going 45p over his £100 limit.
He started exceeding his limit on January 5, but the first Newman knew of the charges was when he received a letter from the bank two weeks ago telling him he owed £111.
He promptly visited his branch to pay off the debt, but was astonished to be told that it had ballooned to £378. He had used his card 10 times to buy snacks, often costing little more than £1. But because he had already crept beyond the limit, he was therefore liable for 10 one-off charges of £35 for each purchase. He was also liable for an unauthorised overdraft fee of £28.
After his visit to the bank he received three more letters - all dated several weeks earlier and sent by second-class post. One letter stated that Halifax would charge him £10 for every letter it sent to chase the debt, as well as £10 for every telephone call.
The bank has now agreed to waive most of the charges.
Another victim of the penalty fees is Bernadette Mardon, 58, who lives in Cardiff. A £4 direct debit that she makes each month to Guide Dogs for the Blind was rejected by her bank, NatWest, because her account had insufficient funds.
NatWest then told her that she would be charged £198 to pay for halting the direct debit.
Lloyds TSB, now majority-owned by the state, has trumpeted “lower” charges that impose a daily rate for going over an agreed overdraft limit.
Sarah Beckett, 23, a graphic designer who lives near Canterbury, found that the new tariff was still punitive. In one month she was charged £80 for exceeding her £2,500 agreed overdraft limit by about £100 for just four days.
Even customers who do not exceed overdraft limits face additional fees. HSBC charges its customers £25 at the end of each 12-month term of an overdraft agreement.
Bob Egerton, who has supported customers in legal actions against banks over penalty charges, said: “It’s quite clear under consumer law that these charges are unlawful and ministers should intervene.”
The British Bankers Association said increased margins reflected the greater risk of borrowers defaulting. The banks say their customers can avoid extra fees by staying within agreed limits.
Lloyds TSB said that when it introduced the new charges for unauthorised overdrafts it cut the interest rates on its unauthorised overdrafts by two-thirds.
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