Who’d be a bank manager these days? A few years ago making money was easy. You gave it to anyone who asked for a mortgage (sometimes lots of mortgages); you practically forced people to take out credit cards and then charged them silly interest rates on the debt they ran up; and just to be sure that the profits kept pouring in you introduced nasty ‘penalty’ fees for any of your customers who did anything you hadn’t agreed to.
£30 for every transaction over an agreed overdraft limit, £20 for every day the account stays in arrears, £25 for every bounced cheque, plus punitive interest on the lot. Pretty soon you are talking real money – £3.5bn a year, according to Office of Fair Trading numbers.
All this has caused fury among the nation’s regularly overdrawn. Energetically led by Martin Lewis of Moneysavingexpert.com, they have been reclaiming fees and campaigning for justice for years. They may soon get it: last week a judge ruled that charges are subject to the Unfair Terms in Consumer Contract Regulations 1999. So the banks are going to have to prove that their charges are ‘fair’ (ie, related in some way to their costs) or cut them drastically.
Sounds good so far? But it comes with a sting in the tail. If the banks end up down a couple of billion quid a year, they are going to look for a way to claw it back. And that means lower savings rates, higher loan rates or another set of fees – even, say ‘experts’ in newspapers this week, the “end of free banking”.
Is this likely? I’m not so sure. As Emma Simon points out in The Sunday Telegraph, the current account market is brutally competitive, with the carrots dangled by small operators getting “jucier and jucier”. Think interest-free overdrafts, 8.5% interest on credit balances and bribes of £100.
New entrants offering this kind of stuff are hardly going to suddenly destroy their businesses by charging fees, nor are big players going to “trigger a stampede of customers to their doors” by doing so. More likely is a bit of creative thinking from the industry and a range of new hidden charges – charges the vigilant can easily avoid, just as they do the current range.