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With the recent charging structure changes, RBS, Lloyds/HbOS etc we asked the FSA to confirm that procedures had been followed.
Lloyds and A&L both have a 'managed'/'control' type account with lower fees and less charges applicable to accounts and I wonder if this maybe the alternative the FSA have instigated with the banks.
You have referred to condition 13(21) of the waiver, which addresses the issue of changes to the level or structure of banks' unauthorised overdraft charges, and requested an outline of our procedures relating to this. Given that this condition was first introduced in the July 2008 version of the waiver, we have set out below the procedures that apply now and the procedures that previously applied. We are, however, unable to provide you with information, or to comment, in relation to our supervision of individual firms.
July 2007 waiver
The waiver that was in place between July 2007 and July 2008 contained the following guidance:
13. Guidance:
(2) Whilst this direction is in force, the firm has agreed with the FSA to have regard to its obligations under the general law and the Banking Code relating to relevant charges complaints. In particular, the firm has agreed with the FSA that it will not:
(a) make materially adverse changes in the level of its unauthorised overdraft charges (or in the ways that it applies such charges to its customers' accounts) which could amount to customer abuse; or
(b) close accounts or threaten closure of accounts of customers for the purpose (or with the intent) of penalising customers that have complained about unauthorised overdraft charges for having complained, or deterring future complaints from these customers or others. For the avoidance of doubt, the firm may close accounts or threaten to close accounts where there is good justification for doing so based on the circumstances of the particular case.
Any firms that made changes to the level of their unauthorised overdraft charges between July 2007 and July 2008 were included in our waiver monitoring work at that time. This monitoring includes data collection and analysis, on-site visits and a thorough review of a sample of customer complaints. Our monitoring work continues on an ongoing basis.
July 2008 and July 2009 waivers
When the July 2008 waiver was granted, the guidance referred to above was removed and replaced with condition 13(21). This read as follows:
"Changes to charges:
(21) the firm must not make any change to the level or structure of its unauthorised overdraft charges. If the firm proposes to do so, then it may apply (in confidence) to the FSA for a variation of this condition. The FSA would expect to grant the variation if the firm satisfied the FSA that the proposed changes are not materially adverse to its customers. In advance of any such application, the firm must conduct an analysis of the proposed changes to identify the extent of any adverse effect on customers and share the analysis with the FSA. The firm must pay particular attention to the impact on customers who are unable to modify their behaviour in response to changes to unauthorised overdraft charges. Variations of this condition are recorded in the attached schedule.
The July 2009 waiver made a minor amendment to condition 13(21). This was to include the following as a new second sentence:
For the purposes of this direction, this includes any change to the level or structure of charges which are levied in similar or equivalent circumstances to unauthorised overdraft charges or which have a similar or equivalent effect.
We have received a number of applications from firms for a variation of condition 13(21) of the waiver since July 2008.
Upon receipt of an application, the FSA will make an assessment of the analysis that firms are required to undertake when applying for a variation of the condition. As part of such an assessment, the FSA may require a firm to provide additional analysis or further information to support its application.
We require firms to provide evidence of the impact of any changes they are planning. This evidence must be sufficient for the FSA to be able to assess whether the impact of the changes is likely to be materially adverse to consumers. Proceeding in this way enables the FSA to continue to satisfy itself that having the waiver direction in place will not result in undue risk to the customers that the FSA's rules are intended to protect.
We have required several firms to make changes to their proposals and/or put in place additional arrangements to assist customers before granting a variation. Where appropriate, when changes have been made, we are monitoring the resulting impact of the changes on customers.
Lloyds and A&L both have a 'managed'/'control' type account with lower fees and less charges applicable to accounts and I wonder if this maybe the alternative the FSA have instigated with the banks.
You have referred to condition 13(21) of the waiver, which addresses the issue of changes to the level or structure of banks' unauthorised overdraft charges, and requested an outline of our procedures relating to this. Given that this condition was first introduced in the July 2008 version of the waiver, we have set out below the procedures that apply now and the procedures that previously applied. We are, however, unable to provide you with information, or to comment, in relation to our supervision of individual firms.
July 2007 waiver
The waiver that was in place between July 2007 and July 2008 contained the following guidance:
13. Guidance:
(2) Whilst this direction is in force, the firm has agreed with the FSA to have regard to its obligations under the general law and the Banking Code relating to relevant charges complaints. In particular, the firm has agreed with the FSA that it will not:
(a) make materially adverse changes in the level of its unauthorised overdraft charges (or in the ways that it applies such charges to its customers' accounts) which could amount to customer abuse; or
(b) close accounts or threaten closure of accounts of customers for the purpose (or with the intent) of penalising customers that have complained about unauthorised overdraft charges for having complained, or deterring future complaints from these customers or others. For the avoidance of doubt, the firm may close accounts or threaten to close accounts where there is good justification for doing so based on the circumstances of the particular case.
Any firms that made changes to the level of their unauthorised overdraft charges between July 2007 and July 2008 were included in our waiver monitoring work at that time. This monitoring includes data collection and analysis, on-site visits and a thorough review of a sample of customer complaints. Our monitoring work continues on an ongoing basis.
July 2008 and July 2009 waivers
When the July 2008 waiver was granted, the guidance referred to above was removed and replaced with condition 13(21). This read as follows:
"Changes to charges:
(21) the firm must not make any change to the level or structure of its unauthorised overdraft charges. If the firm proposes to do so, then it may apply (in confidence) to the FSA for a variation of this condition. The FSA would expect to grant the variation if the firm satisfied the FSA that the proposed changes are not materially adverse to its customers. In advance of any such application, the firm must conduct an analysis of the proposed changes to identify the extent of any adverse effect on customers and share the analysis with the FSA. The firm must pay particular attention to the impact on customers who are unable to modify their behaviour in response to changes to unauthorised overdraft charges. Variations of this condition are recorded in the attached schedule.
The July 2009 waiver made a minor amendment to condition 13(21). This was to include the following as a new second sentence:
For the purposes of this direction, this includes any change to the level or structure of charges which are levied in similar or equivalent circumstances to unauthorised overdraft charges or which have a similar or equivalent effect.
We have received a number of applications from firms for a variation of condition 13(21) of the waiver since July 2008.
Upon receipt of an application, the FSA will make an assessment of the analysis that firms are required to undertake when applying for a variation of the condition. As part of such an assessment, the FSA may require a firm to provide additional analysis or further information to support its application.
We require firms to provide evidence of the impact of any changes they are planning. This evidence must be sufficient for the FSA to be able to assess whether the impact of the changes is likely to be materially adverse to consumers. Proceeding in this way enables the FSA to continue to satisfy itself that having the waiver direction in place will not result in undue risk to the customers that the FSA's rules are intended to protect.
We have required several firms to make changes to their proposals and/or put in place additional arrangements to assist customers before granting a variation. Where appropriate, when changes have been made, we are monitoring the resulting impact of the changes on customers.
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