James Daley: Be careful what charges you wish for
Saturday 26 April 2008
The popping of champagne corks on Thursday – when the Office of Fair Trading (OFT) won its court case against the banks – was more than a little premature. While the result does, indeed, open the door for an OFT clampdown on bank charges, it is improbable that anything will happen in 2008, and there is no guarantee that there will be a resolution even before the end of 2009.
For a start, the banks are sure to launch appeals against Thursday's ruling – firstly in the Court of Appeal and then in the House of Lords. The case is too important for them to accept this week's decision – and whichever way the first appeal goes, both sides will want a final and definitive verdict from the House of Lords. All that will take time.
Furthermore, Thursday's verdict only brought stage one of a two-part case to a close. Now that the court has ruled that the banks' charges are bound by the Unfair Terms in Consumer Contracts Regulations 1999, it has to start all over again to decide whether or not the charges are actually unfair.
It's also worth noting that Thursday was not a complete washout for the banks. The judge in the case ruled that their charges could not be deemed to be a "penalty", which may prove to be crucial in the second half.
Although I have some sympathy with the hundreds – perhaps thousands – of consumers who are being forced to wait for a resolution to their claims for unfair bank charges (the Financial Services Authority has put a waiver in place until the test case is resolved), people may want to be careful what they wish for when it comes to the final verdict in this case.
If the OFT wins the right to cap the charges of UK banks, consumers will only end up paying elsewhere. For the moment, the British are spoilt when it comes to banking. Many services that cost real money in other countries are free to us over here. The only cost to us is the cost of accepting a low rate of interest on our current accounts. And even then, there's no longer any reason to accept this penalty. The market has become so competitive these days, that it's possible to get a good rate of interest and get all your other banking services for free.
Admittedly, the charges for busting your overdraft limit – or having a cheque bounced – are still very high. But if these are capped, banks will be forced to up charges in other areas of their business.
Already mortgage fees have soared in recent years, while credit card fees and interest rates have also been on the rise.
It's much like the airlines. As their costs have increased, they've been forced to try to recoup some revenue elsewhere. But the airfare market is so price-elastic that they can't simply put up their prices. Instead, they're lowering the maximum weight of your bags – so that more people are forced to pay excess luggage. They're charging for alcoholic drinks, and they're penalising those who don't check in online. All told, customers might end up paying 20 per cent more than they paid for their ticket – and would probably have been better off choosing a slightly more expensive airline that doesn't skimp on the service.
Be it the banks or airlines, this kind of pricing is only making it harder for consumers to know when they're getting a good deal. Personally, I'd rather pay £10 a month to my bank in return for an honest and good-value service. But the British aversion to straightforward charges means it's far more likely that the smoke and mirrors game will prevail.
Read the Independent's Cash Crusader blog here
- 1 What happens to your body when you give up sugar?
- 2 Have sex with your iPad thanks to the new sex toy no-one asked for
- 3 The 'sex selfie stick' lets you FaceTime the inside of a vagina
- 4 Why you're almost certainly more like your father than your mother
- 5 Westboro Baptist Church couldn't picket Leonard Nimoy's funeral because they didn't know where it was
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
Nigel Farage promises Ukip will not 'stigmatise' would-be migrants – and says he wants 'everyone to speak the same language'
Ex-head of MI6: 'We shouldn't kid ourselves that Russia is on a path to democracy'
Most people think legal tax avoidance is just as wrong as illegal tax evasion, poll suggests
iJobs Money & Business
£8 per hour: Recruitment Genius: This Pension Specialist was established early...
£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads