ILLEGAL PROFITEERING IN BANKING

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Banks are cheating customers out of £750million by slashing interest payments on current accounts. Britain's biggest banks have cut interest payments by a fifth in the last year, even though interest rates are at a six-year high. Bank of England figures show the average rate of interest has fallen from 0.55% to 0.43% in the 12 months to April. In the same period the Bank raised their base rate to 5.25%. Halifax dropped the rate on their Moneybank account from 0.5% to 0.1% and Royal Bank of Scotland cut the rate on their Royalties account from 0.2% to 0.15%. Overall the cuts have earned banks an extra £750million. A Halifax spokesman said, "Current accounts are not intended to be used as savings vehicles." (Source: Sunday Mirror, Jun/07)

Stephen Hone successfully sued the Abbey National for charging him £32 when he went overdrawn. He claimed that penalty charges of £32 for bounced direct debits did not reflect the amount it cost for a bank computer to generate an automatic letter and charges and was instead a "money spinner". He claimed the penalty was among a list of rip-off charges that cost him £2,000 over six years, took the bank to court and won by default when Abbey failed to defend the action. He was then offered an out-of-court settlement of £5,000.

Stephen, of Plymouth, Devon, sued under the unfair terms section of the Consumer Contracts Regulations 1999. It states a consumer should not pay a disproportionately high amount of compensation if he or she fails to meet an obligation. Stephen said, “When I realised they were in breach of the law, I told them to refund the money within 14 days or I’d take them to court. I didn’t get a reply, but was told later that they would offer me a goodwill gesture of £32. That’s hardly enough to compensate me for all I’ve been through.”

Eddy Weatherill, chief of the Independent Banking Advisory Service, said, “These over-the-top charges have been accepted by consumers for too long.” Mike Naylor, of consumer magazine Which?, said, “Charges such as these do not represent the actual costs the banks incur and are clearly too high.” Abbey claimed the large payout was made for “commercial and business reasons”. A spokeswoman said, “Legal costs of continuing with the case would far exceed the amount at stake. Abbey is up front and transparent about all charges. They compare favourably with others.” In other words, ALL banks are ripping us off. (Source: The Sun, Feb/06)

Following new regulations, most people accept they will be asked for detailed personal information during any kind of financial activity. But when does a request for information go too far? And how do you know the information you provide will be used in the right way?

Opening an account is not as simple as it once was. You have to prove who you are, in duplicate, and give other information. Banks blame tough new laws on money laundering and financial crime. But one customer is not convinced. Ms X tried to open a Cheltenham & Gloucester cash ISA but was shocked when she was asked for more than 30 pieces of information.

She said, "They wanted to know whether I was employed, retired or a student, when they could contact me at home, was my telephone number ex-directory, was the money going to come from salary or wages or investments or a pension. The chances of me putting down that I obtained the money from drug dealing or any other illegal activity is highly unlikely, so therefore I think the questions posed were totally unnecessary."

Ms X was so annoyed she did not open the ISA and she suspects the company's market research is being done under the guise of this money laundering legislation. Cheltenham & Gloucester's Head of Communications Peter Mounty insisted it was a response to the Proceeds of Crime Act.

The questions are there, he said, to protect staff from potential legal action if they had not taken the required steps to establish where the money was coming from and what it is being used for. But how can a series of questions, that can be answered in any way the applicant chooses, prevent crime?

Mr Mounty admitted that "anyone that is a terrorist is not going to put down that this is money laundering". However he said that although "none of them will prevent financial crime, all of them will help, or potentially help, to identify where the proceeds of financial crime are placed into account."

But in Ms X's case, it was an application for an ISA account with an annual savings limit of £3,000. On this, Mr Mounty said, "In fairness I suppose because of the ISA form, I would have to say that the questions that we ask are generic questions that appear on all of our forms."

But he insisted they would not be changing it "because I think it sends a very clear message that C&G is concerned about fighting financial crime." Asked if the information would be passed onto their marketing department, he said, "There is a place on the form where the customer can specifically say any information on this form does not have to be passed to the marketing department."

But he insisted that the information is not gathered for that purpose. Mr Mounty said that in his experience customers had been happy to provide the information because they understood the need to fight financial crime.

Bank customers could be hit with a £1.50 charge to transfer cash quickly. The fee could be levied to cover the cost of a £100million computer upgrade needed to process transfers faster than the usual three days. However, the move has angered consumer groups who say customers already lose £30million in interest each year as cash is processed, with the money pocketed by the banks.

Barclays, Royal Bank of Scotland, Lloyds TSB and HSBC are being urged to pay for the upgrade from their combined profits of £20BILLION a year. The Office of Fair Trading has also called for cheques to be cleared more quickly after moves by the Halifax to increase the wait to six days.

The Liberal Democrats' Vincent Cable said, "It seems ludicrous that you can click a button and supposedly transfer money instantly and it then takes three days to get there." Ah, but it doesn't. The banks sit on the money gaining interest before passing it on.

HFC bank revealed customers personal details in an e-mail. The bank sent "urgent" e-mails to 2,600 people but an error meant that each address was visible to everyone else on the list. The problem was compounded when customers "out-of-office" messages began to respond, many containing home and mobile telephone numbers.

The bank admitted it was in breach of data protection law and credited affected people's accounts with £50 compensation but many customers are still unhappy and are considering legal action. HFC Bank is owned by HSBC, and operates credit cards for Marbles, Vauxhall GM and Goldfish, as well as affinity cards for the Law Society and the Open University.

The bank claims a senior payment advisor made the mistake on, when three e-mails were sent to groups of more than 800 customers asking them to call a helpline number. The Information Commissioner confirmed that although HFC did break the law, it will not take action on this occasion.