ILLEGAL PROFITEERING IN BANKING

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Brian Mullen took Lloyds TSB to the county court over fines levied on his current account. He got tired of receiving fines of £30 each from his bank after direct debits and standing orders took him above his overdraft limit. Mr Mullen, of Manchester, took the action claiming that almost £2,000 in charges was illegal but the bank failed to challenge the claim and Mr Mullen won the action by default.

After the bank failed to pay him the outstanding balance, he was given the further power to order bailiffs round to his neighbourhood branch in Reddish to seize their assets. He filed the lawsuit against the firm complaining that the charges were illegal because they were worth more than the cost to the bank of Mr Mullen exceeding his overdraft, and were also a penalty charge. A spokeswoman for Lloyds TSB said it did not plan to appeal the judgment and had paid Mr Mullen the amount owed to him.

She said, "In the normal course of action we would and do deal with any queries as and when they arise. Unfortunately Mr Mullen's claim wasn't picked up as it should have been and as a result he obtained a default judgment against us. The default judgement isn't a court judgment on the merits of the case, it simply means that we did not file a defence in time." (Source: The Sun, Mar/06)

HSBC, Barclays and Royal Bank of Scotland have reported big profits recently. But how can you ensure that you are getting the best deal from your bank? The UK's biggest banks are busy announcing bumper profits. Collectively, it's estimated that UK banks are making more than £30bn, that's more than £3m an hour. But their gain need not be at your expense. There are lots of simple ways to make sure you aren't losing out, while pocketing a few extra pounds for yourself, too. If you are one of the seven in 10 people who still have a current account with the big four banks, Barclays, HSBC, Lloyds TSB and NatWest, then you may be missing out on the best rate of interest.

Most of the current accounts offered by the big four pay about 0.1% interest, which compares very unfavourably with the 5% available from Alliance & Leicester. What is more, if you regularly slip into the red it is important to check your overdraft rate too. Nationwide currently have the lowest overdraft rate available, 6.75%, whereas Lloyds TSB charges up to 18.2%. Cahoot automatically gives its customers a £250 interest free overdraft, great for borrowing small sums of money. Banks charged a staggering £3bn for unauthorised overdraft charges in 2004. So, if you have overspent, contact your bank as soon as possible.

You may be able to set up a small temporary overdraft or increase your limit. Complain if you feel you have been harshly penalised. If after looking at how your current account shapes up you decide to switch provider, the good news is that it is easy to do so. In the latest Which? survey, 90% of respondents who had switched current account provider said it was straightforward. If you use a credit card to borrow, you should make use of 0% deals, they can save you hundreds of pounds. But don't be caught out by sneaky tricks. Many credit card companies rely on customers forgetting to move their balance once the interest free period runs out. One card charges up to 18.9% once its 0% deal runs out.

Even if you always pay off your credit card balance in full, it's still worth shopping around. Some cards give you 'cashback' on everything you spend (usually 0.5% to 1%). Some are less generous for higher spenders; with others you get a higher percentage if you spend more. And keep an eye on your card's cashback rate: lots of issuers slashed their rates recently. Like unauthorised overdraft charges, banks make lots of money from credit card penalty charges. Banks make about £400m a year by charging customers who pay credit card bills late or exceed credit limits. So, where possible, make payments by direct debit and keep a watchful eye on your credit limit.

You will find big differences in rates between personal loans too. But it is not just the interest that makes loan firms money, it is the extras. Personal loan companies make at least £1bn in commission from selling payment protection insurance (PPI) with personal loans each year. Which? has found that adding PPI on to a three-year £5000 HSBC loan would increase the total cost by £1,000. PPI is designed to pay your loan or credit card payments if you are unable to work. However, it is expensive, gives limited cover and can be useless for the self-employed or those on contracts. Many companies automatically include PPI in quotes so do not get caught out.

UK savers could earn an extra £10bn in interest each year by switching savings to the best rates available. That is more than £360 each. Best-buy instant access and notice accounts are paying the highest interest rates we have seen for three years. Take advantage of introductory bonus rates too, these are higher rates offered to new customers for an initial period. But don't forget to move your savings once the bonus rate expires. The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. (Source: BBC News)

Britain's banks have less than two months to commit to speedier cheque and payment clearing or they will be forced into reform by legislation. With almost every UK bank reporting record profits, ministers are understood to have lost patience with the slow progress and want to see real commitment from an official task force. An informed source said, “If they fail to show progress then they get a regulator and legislation.” The task force, created under the auspices of the Office of Fair Trading, consists of clearing bank payment organisations, including APACS, as well as consumer and business groups.

Some members are already frustrated by the lack of progress. Which?, formerly the Consumers’ Association, threatened to walk out if the task force failed to secure real commitment from the banks with a timetable. Lawrence Baxter, a senior policy adviser at Which?, who sits on the task force, told The Times, “If we get to April without getting some kind of commitment from the banks, we will seriously consider leaving the task force. If we are not satisfied there’s no point in continuing in a process that’s not delivering anything.”

He claimed that he had some support from other user groups on the task force, including the National Consumer Council, the British Retail Consortium, the Federation of Small Business and the British Chambers of Commerce. “We all have the same concerns,” he said. Support for faster action also came yesterday from Norman Lamb, MP, a member of the Treasury Select Committee, who said the size of bank profits reported over the past few days strengthened the case for faster action. “Now is the time, on the back of these substantial profits, to commit to setting a target (on faster clearing) and achieving it,” he said. (Source: Times Online)