James Daley: Banking bargains? That'll be the day
Saturday 05 January 2008
This is set to be the year when the banks finally get their comeuppance in the British courts, as the Office of Fair Trading challenges the legality of their extortionate current-account charges.
To my mind, there's only one way this case can go. Given that the OFT has already told the banks that they can't charge more than 12 when people miss a payment on their credit card, there's no way the watchdog can now leave the door open for customers to be hit with charges of as high as 60 for accidentally busting their overdraft limit. The banks will rightly be reined in, and wronged consumers will once again be free to reclaim the excess fees that they have been landed with over the past few years.
Unfortunately, however, this process is sure to take many months to complete and, while a preliminary verdict is likely to be announced some time later this year, it may be 2009 or beyond before the case has made its way through the appeal courts and the House of Lords.
In the meantime, you can expect the foulest of foul play from most of the big high-street banks, who are currently all reeling at the hands of the credit crisis and are as desperate as ever to make a quick buck any way they can.
The banking sector's "January sales" are always a great illustration of just how low they will go. What started off as a relatively clever marketing ploy a few years ago, pioneered by HSBC, has now turned into the perfect excuse for anyone to dress up their uncompetitive products as a "bargain".
Check out NatWest's January "sale", for example, and you'll find that you can get a loan with a typical APR of 7.4 per cent almost a whole percentage point higher than the market-leading loan rate of 6.5 per cent (offered by Sainsbury's Bank).
Meanwhile, HSBC is boasting that it will donate 2 to the World Wildlife Fund if you sign up to any of the products in its "sale" this month. However, you'd be much better off shopping around for a better deal elsewhere be it on a loan, credit card or savings account and handing the difference over to WWF yourself. It'll come to a whole load more than two quid!
Although, as I've said before, I have some sympathy with the banks after all, they need to be allowed to make money like any other company it's their lack of transparency and insistence on using smoke and mirrors to trip up the consumer that is so frustrating.
Just before Christmas, I came across yet another astonishing example. When meeting with a company called Stonehaven, which offers equity release products, I asked them who they were owned by. I was told that, unfortunately, they weren't permitted to disclose that information, and also that they couldn't tell me why they couldn't tell me. Either way, they said, I should take comfort in the fact that they had the backing of a "major bank", and as a result they were very trustworthy.
Two minutes on the internet helped me to work out that the "major bank" in question was Abbey, which in turn is owned by Santander Central Hispano, the Spanish banking giant. So why on earth would they not want people to know?
The answer is, almost certainly, that equity release has had a bad name over the past few years, and while it is a lucrative business, Abbey and Santander probably don't want their brands directly associated with it in the UK.
If you make one resolution in 2008, it should be to keep your eyes open when you're buying financial products. Sadly, if you give the banks the chance to rip the shirt off your back, they'll probably take it.
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