ILLEGAL PROFITEERING IN BANKING

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Banks are using "sneaky" charges to recoup their losses since being ordered to slash penalty fees by industry regulators, it has been revealed. A study has identified 112 charges across key financial products such as credit cards, current accounts and mortgages. Banks have been under pressure to cut the size of penalty fees and other charges imposed on consumers following allegations they are illegal and unfair.

Many have responded by introducing a host of smaller charges, meaning customers are still being stung for huge sums. In the past a credit card customer might have been hit with a £25 fee for missing a payment deadline. But now they could receive two £12 charges under different headings instead. The "Penalty Trap" is raking in more than £8billion a year for an industry which has recently announced record profits.

Researchers at moneysupermarket.com looked at the charges imposed by leading banks and building societies on mortgages, current accounts, savings, loans and credit cards. A year ago consumers faced 110 penalties across these products from a group of high street giants. The figure has now risen to 112. Credit card customers can be charged for not telling their bank in good time about a change of address, while some firms have introduced annual fees for customers who do not use their cards much.

Others have even started charging customers if they have a credit, rather than a debit, on their account. Moneysupermarket experts found 51 penalty charges on mortgages, up from 46 last year. The new fees include up to £75 to change the repayment method and up to £26 for not taking building insurance from the same provider. Lenders have also raised mortgage application fees, sometimes to as much as £2,000, after they were ordered to dump exit fees imposed when a customer moves to another lender. (Source: Mail on Sunday, Aug/07)

A man who was fed up with paying massive bank charges decided to give one of the high street giants a taste of its own medicine. When Royal Bank of Scotland refused to refund £3,400 charges that Declan Purcell believed he was owed, he sent in the bailiffs. Customers at his branch of RBS watched as debt collectors seized four computers, two fax machines and a till filled with cash.

The branch manager was told that the items would be sold unless RBS came up with the money owed to Mr Purcell. Only when the manager gave an undertaking that the debt would be paid did the bailiffs leave. The move is part of a consumer fightback against bank charges, which net an estimated £4.5 billion every year. Mr Purcell, from East London, had warned his bank that he was prepared to go to court to claim back charges he believes were imposed unlawfully.

He demanded the refund of £3,400 charges he accrued during the previous six years while running a motorcycle dealership. RBS ignored the claim so Mr Purcell filed an online application to get the money back through the county court. After 30 days the bank had not responded and so the court ruled in Mr Purcell's favour. It ordered RBS to pay the charges and £120 court costs. When RBS again failed to respond Mr Purcell got the court to give him a warrant of execution, allowing him to order debt collectors to reclaim items from the bank equal in value to the amount he was owed.

A spokesman for RBS said, "We are looking into this as a matter of urgency, but early indications suggest that unfortunately due to an administrative error, the bank failed to defend the claim leading to a default judgment being obtained on the branch and a resulting warrant. The confusion was cleared up at the branch." Marc Gander, who set up campaign website Consumer Action Group, which helps consumers get refunds from their banks, said, "I am quite sure that Mr Purcell will not be the last person to send bailiffs in to his bank." (Source: This is London, Jan/07)

The Office of Fair Trading(OFT) is investigating payment protection insurance(PPI) sold with loans and other credit amid allegations of rip-offs and mis-selling. Victims of the bank 'loan protection racket' could be entitled to refunds and compensation totalling £10 billion. Now, a new study claims that as many as 50% of those sold the cover may be entitled to a refund and compensation.

PPI is sold with loans, credit cards, mortgages and other finance on the basis that it will cover the related loan repayments if someone is suddenly made unemployed or falls ill. However, the banks face allegations that most of the policies have imposed unfair and inflated premiums. There is evidence that bank staff have been offered huge cash incentives and perks in order to meet sales targets for PPI policies.

As a result, the policies have been sold to customers without a proper explanation about the limitations of the cover and it is alleged, the policies have been sold to millions of Britons without proper checks on whether they were suitable. In some cases, people with long term illnesses, working in seasonal jobs or even the retired have been sold the policies, despite the fact they are not eligible.

Annual sales of the policies are said to generate premiums of around £5.4b, but £4b of this is said to be pure profit. The OFT has already established that the number of successful claims made on the policies is minuscule compared to other types of insurance. This is because making a claim on the policies if often a nightmare. Most are wrapped in smallprint clauses that can make the policy void. Where banks are found to have mis-sold a policy, the best they normally offer is a refund of the premiums. (Source: This is London, Oct/06)

Banks are switching customers to so called "packaged" accounts, which incur a monthly charge of £10 or more and hundreds of thousands of customers are being "upgraded" to these fee-paying current accounts without their permission. In return they get "free" or discounted perks such as travel insurance and fraud protection that many customers rarely or never use. A survey by the price comparison website uSwitch suggests that as many as 1.3 million customers have been moved to packaged accounts without consent. This represents about 15% of all customers with this sort of account.

The Banking Code Standards Board said that it had intervened in the past when such automatic upgrades had taken place. Nick White, of uSwitch, said, "Packaged accounts allow banks to charge customers for the privilege of being cross-sold additional financial products. Just because they claim to offer customers a discount for taking up the additional services does not mean it is the best deal." Packaged deals are a lucrative source of revenue, generating an estimated £530 million a year for the banks.

About 20% of current account holders, or eight million people, are signed up to the deals. Despite the claimed additional benefits, uSwitch says that one quarter of customers with packaged accounts never used the extra services for which they are paying. Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland said that they would never automatically upgrade someone without their consent. (Source: Mail on Sunday, Sep/06)

Several banks and other financial institutions have been criticised for putting customers' personal information in bins outside their premises. The Information Commissioner's Office (ICO) has made them promise to comply with the Data Protection Act in future. If they do not do so, they can be prosecuted by the ICO. "It is unacceptable for banks and other organisations to carelessly discard their customers' information," IOC Deputy Commissioner David Smith said.

The institutions are HBOS, Alliance & Leicester, Royal Bank of Scotland, Scarborough Building Society, Clydesdale Bank, NatWest, United National Bank, Barclays Bank, Co-operative Bank, HFC Bank and Nationwide building society. The Post Office and the Immigration Advisory Service were also found to have disposed of personal information in the same way. The ICO investigation followed evidence provided by the BBC's Watchdog programme, as well as the consumer group ScamsDirect.

The Watchdog investigation found information such as details of a bank transfer for £500,000 outside a Nottingham branch of the Royal Bank of Scotland and paying-in envelopes with customer names and telephone numbers, sort codes and account numbers, at a Halifax branch in Manchester. The ICO is an independent authority set up to promote access to official information and protect personal information. (Source: BBC News, Mar/07)

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