The outrageousness behaviour of banks has been dramatically illustrated with the case of Cheltenham student Laura Gibson, whose 8 pence overdraft with Lloyds TSB has turned into a bank charge of more than £800.
Lloyds TSB has threatened Laura, 20, of Cheltenham, with legal action to recover the debt, which began when she made a £60 purchase in September last year. The purchase put Ms Gibson 8p in the red which immediately triggered a fee of £65.
As Ms Gibson did not clear the overdraft she was charged a further £30 in October, £60 in December and £78 in January. Then in May, Lloyds TSB increased its unauthorised overdraft charges to a flat rate of up to £20 a day.
She said: “This whole episode has been an absolute nightmare. I’ve now paid more than £300 in charges but still they want more. I’ve stopped using the account and the way I’ve been treated is disgraceful.”
Ms Gibson, who is enrolled to start A-Levels in September, says the stress of the charges contributed to a nervous breakdown. “Lloyds TSB have been harassing me by telephone and by mail, putting pressure on me to pay this money back. I feel that it is morally irresponsible that the bank can charge people such ridiculous amounts of money especially when some of the charges amount to more than my income each week.”
Last week, research conducted by Moneynet.co.uk, the price comparison website, found that Lloyds TSB had the most expensive overdraft charges of all the high street banks. Moneynet compared the charges incurred on an unauthorised overdraft of £50 over two weeks. HSBC had the lowest fee of £25.10 but Lloyds TSB charged £165.36, almost double the rate of the next most expensive bank.
The Financial Services Authority (FSA) has extended a waiver that allows the banks to put on hold customers’ complaints about overdraft charges. The decision means that tens of thousands of customers hoping for refunds of charges will have to wait for at least another six months to learn if they will receive any compensation.
The FSA said the waiver extension should give sufficient time for the Court of Appeal to decide whether the Office of Fair Trading (OFT) has the right to determine a fair level for overdraft fees. In April, the OFT won a test case in the High Court confirming its jurisdiction over bank charges but the banks appealed the decision.
Martin Lewis, of Moneysavingexpert.com, a consumer website, criticised the FSA for siding with the banks. He said: “It’s nearly a year since the FSA first kiboshed reclaiming, and people are still sitting on their hands, unable to try to reclaim money which was taken from their accounts without their permission, while the banks continue to make hundreds of millions in charges. How long are people expected to wait?”
An OFT report claimed the high street banks make about £2.6 billion a year from unauthorised overdraft charges. The report also criticised the banks for the complexity of their charges as well as their lack of transparency, making it difficult for customers to compare current accounts.
(I found this little gem of a story about how the dishonest banks prey on ordinary people somewhere else on the internet and thought it deserved repeating to the widest possible audience. I have no doubt it is completely accurate as I have had similar experiences and certainly heard of many others.)
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