Banks win in High court (overdraft charges etc)

[ROSM]

I seem to have walked into the online Daily Mail here.

Let's be clear here that the judgement is that the defence put forward by the Banks at the very first case was valid. That being that the 'unauthorised' overdraft fees could not be challenged by the OFT in the manner they wished to as the potential for these fees was widely communicated, included in the T&Cs and the costs were published so therefore were not 'unfair' in those terms.

You could say this is a technicality, but ultimately legal decisions are often made on points of law.

Whether the fees themselves are too high can be challenged by a number of other means which the OFT have at their disposal - although I suspect that none will give the carte blanche results that Martin Lewis, Which et al wanted.

But supermarkets, holiday firms etc all have 'loss leader' pricing.

And while we're here, I just love US's rants against the banks. Uncle, you really need to avoid the generalisations that Mortgage Brokers seem to love (ironic comment before anybody jumps on this!)

 

[beorhthelm]

So once the US banking system recognised the problem, how did they then bundle such volatile debt and sell it to our own bankers.

The US bankers must of known its risk thats why they were selling it, so how did our own bankers not also recognise the risk those US bankers had already identified ??

they didnt recognise the problem, thats the point. the debts where bundled up combining good and bad loans into new investment packages. they then insured these against losses (the now infamous CDS). all the time the value of the underlying assets rose, the bad debt was offset and hidden. ie, even if someone wasnt paying their mortgage, the value was increasing more than they owed so banks wasnt too worried.

no one checked what was going on in the parceled debt and no regulator questioned the CDS setup. to top it all off, the insurers where taking premiums on other peoples debt, a bit like you taking insurance on your neighbours car/house. so if a claim was made on one bad investment, the payout was many times more than the asset was ever worth. cue collapse when people twigged and confidence in the heavily involved investment banks/banks and insurers was undermined.

 

[adrian29uk]

People are missing the point here. Its not that banks are not entitled to recoup any expenses they have incurred if someone steps over the overdraft limit it is the fact they are taking the piss with charging £ 80 for a returned dd and charging £ 35 if someone goes £ 1 over the limit.

I am amazed at the bank arse lickers on here considering they have virtually single handedly bankrupt this country and see it back 30 years for which it is costsimng us
£ 13000 per person to cover their bad debts by spunking tens of billions of pounds in the USA sub prime market.

They then have the check to criticise individuals for not managing their acounts to the letter and stealing , yes stealing money with wheel clamp style bank charges.

This is a very bad day and you can expect these fees to now be aboused, ie £ 150 for a bounced dd, why not £ 500 ?. The banks now have carte blanche to do what they want.

Spot on, and do you know what? Their slowly developing the same old practices as what they did before they screwed our economy up. Of course they dont want to tell you this, thats why we have cute little adverts on the TV, where they speak to the general public like we are bunch of complete idiots.

As we all know, the one thing banks hate are careful customers. They cant make any money out of you. The only loser is you, not the banks.
Of course like another user said, because these banks are now partly owned by the goverment that's more money we all have to pay.

 

[sten_super]

My point is that it wasn't our mortgage lending that determined any of the resulting problems.

I am not too sure where our sub prime mortgages exsist, self cert

But I am not aware that there was any great default on that lending here in the UK so those mortgages probably remain quite profitable for those lenders.

the USA sub prime mortgages did start to default in frightening numbers, I am told that you could raise a mortgage whilst on benefits over there and there is not a parallell here.

So once the US banking system recognised the problem, how did they then bundle such volatile debt and sell it to our own bankers.

The US bankers must of known its risk thats why they were selling it, so how did our own bankers not also recognise the risk those US bankers had already identified ??

Without meaning to be rude, I think you have a couple of misconceptions regarding the crisis. There isn't really a US banking system and a UK banking system; there is a global banking system. I'm going to use an example to attempt to illustrate where the problem arose. Apologies if I'm telling you things you already know.

Specialist subprime mortgage lender A arranges £50m of subprime mortgages, with an expected return of £70m (taking into account the high interest payments but also the estimated number of defaults). A then sells these on to bank B for £55m.
B takes £27.5m of this asset (expected return £35m) and combines it with £25m of normal mortgages (expected return £30m), and sells to bank C for £55m.
C takes £27.5m of this asset (expected return £32.5m) and combines it with £25m of government bonds (expected return £28m), and sells to bank D for £59m.

Now we have three banks holding at least part of this package of £50m of subprime mortgages. Defaults go up, and instead of the package having an expected value of £70m it turns out it is only worth £40m. All three banks have assets that are not worth as much as they thought they were.

Now bank A may have been American, B British and C American. There was no deliberate offloading from the US to the UK, or vice versa, more a continual flow across continents. Also, the problem was not selling the volatile debt in the first place, more to do with the value at which it was sold.

The final problem was that, as soon as the banks realised that these assets were worth less than they originally thought, instead of telling everyone they kept quiet, in the hope that they could continue to trade assets to make up for the shortfall. Therefore everyone kept going and making the system worse, until Lehmann Brothers collapsed. Only at that point did everyone realise that the current model was completely unsustainable, and at that point everyone knew that everyone else had been doing it, so there was no trust between branches of the same bank, let alone different banks.

I'm sure people on here can give much more technical descriptions - I am not a banker. But that is my understanding of the major problem that caused the crisis.

 

[JJ McClure]

So,
1) Banks steal everyone's money,
2) Banks either lose said money or give it out in massive bonus,
3) Government gives banks more of everyone's money,
4) No-one is ever going to get their money back.
Is that about it?

 

[beorhthelm]

So,
1) Banks steal everyone's money,
2) Banks either lose said money or give it out in massive bonus,
3) Government gives banks more of everyone's money,
4) No-one is ever going to get their money back.
Is that about it?

5) lots of people get seperate issue confused
6) everyone cries about banks making money, without thinking where they'd be without them (digging up your own food probably)

 

[Deleted User X18H]

The thing is the banks need to charge a deterrent for persistent abusers but as said previously, charging £35 for going a couple of quid overdrawn is very disproportionate.Is this ruling retrospective or not? Hopefully soon the new banking code will come into force. Seeing as a majority of UK banks are now partially state owned it is likely the supreme court were manipulated in someway. However the new ploy appears to be asking a bank to provide a copy of the executed original credit agreement many banks can not provide this and therefore can not take debtors to court.

 

[BigGully]

Without meaning to be rude, I think you have a couple of misconceptions regarding the crisis. There isn't really a US banking system and a UK banking system; there is a global banking system. I'm going to use an example to attempt to illustrate where the problem arose. Apologies if I'm telling you things you already know.

Specialist subprime mortgage lender A arranges £50m of subprime mortgages, with an expected return of £70m (taking into account the high interest payments but also the estimated number of defaults). A then sells these on to bank B for £55m.
B takes £27.5m of this asset (expected return £35m) and combines it with £25m of normal mortgages (expected return £30m), and sells to bank C for £55m.
C takes £27.5m of this asset (expected return £32.5m) and combines it with £25m of government bonds (expected return £28m), and sells to bank D for £59m.

Now we have three banks holding at least part of this package of £50m of subprime mortgages. Defaults go up, and instead of the package having an expected value of £70m it turns out it is only worth £40m. All three banks have assets that are not worth as much as they thought they were.

Now bank A may have been American, B British and C American. There was no deliberate offloading from the US to the UK, or vice versa, more a continual flow across continents. Also, the problem was not selling the volatile debt in the first place, more to do with the value at which it was sold.

The final problem was that, as soon as the banks realised that these assets were worth less than they originally thought, instead of telling everyone they kept quiet, in the hope that they could continue to trade assets to make up for the shortfall. Therefore everyone kept going and making the system worse, until Lehmann Brothers collapsed. Only at that point did everyone realise that the current model was completely unsustainable, and at that point everyone knew that everyone else had been doing it, so there was no trust between branches of the same bank, let alone different banks.

I'm sure people on here can give much more technical descriptions - I am not a banker. But that is my understanding of the major problem that caused the crisis.

You weren't being rude ..... just a little long winded.

I do not accept your analogy of their not being a US banking or a UK banking system, although I accept they are all interlinked, there remains degrees of responsibilities and the toxic debt generated by the USA makes them more culpable than anyone else.

Ultimately due to those actions we are all being fined, in the way of taxation.

 

[sten_super]

You weren't being rude ..... just a little long winded.

I do not accept your analogy of their not being a US banking or a UK banking system, although I accept they are all interlinked, there remains degrees of responsibilities and the toxic debt generated by the USA makes them more culpable than anyone else.

Ultimately due to those actions we are all being fined, in the way of taxation.

Agreed, on all points (especially the first one!).

The US, as the originator of these mis-priced loans, take a large chunk of the blame. However, the subsequent mis-pricing by British banks (in part due to initial errors in terms of valuation, and in part due to the complicated packaging that went on that meant ultimately no-one knew exactly what they were re-selling) means they also carry a decent share of the blame. And as you say, it is ultimately us taxpayers that are paying for it.

 

[drew]

Can we just making it clear. Is anyone on here refuting the idea that the proximate cause of the credit crunch crisis was the irresponsible lending to the US sub prime market. The subsequent increase in US interest rates and collapse of US property values resulted in huge losses and a collapse in confidence of the financial sector. If there is another theory then please enlighten us.

 

[Uncle Spielberg]

The thing is the banks need to charge a deterrent for persistent abusers but as said previously, charging £35 for going a couple of quid overdrawn is very disproportionate.Is this ruling retrospective or not? Hopefully soon the new banking code will come into force. Seeing as a majority of UK banks are now partially state owned it is likely the supreme court were manipulated in someway. However the new ploy appears to be asking a bank to provide a copy of the executed original credit agreement many banks can not provide this and therefore can not take debtors to court.

No Tim you are confusing this issue with unfair credit agreements and there is a trial of 12 cases next week. Watch this space.

 

[WATFORD zero]

No Tim you are confusing this issue with unfair credit agreements and there is a trial of 12 cases next week. Watch this space.

Credit agreements, The vacant lady, Bank charges, paul valley, HB&B - I can see how Tim is getting confused

 

[drew]

The thing is the banks need to charge a deterrent for persistent abusers but as said previously, charging £35 for going a couple of quid overdrawn is very disproportionate.Is this ruling retrospective or not? Hopefully soon the new banking code will come into force. Seeing as a majority of UK banks are now partially state owned it is likely the supreme court were manipulated in someway. However the new ploy appears to be asking a bank to provide a copy of the executed original credit agreement many banks can not provide this and therefore can not take debtors to court.

Surely this is not about going a couple of quid overdrawn. This is about exceeding any authorised overdraft. In effect, you are taking out a personal loan except that it hasn't been agreed by the bank and you haven't got agreed what the repayments are.

Having said that, the bank charges may seem extortionate but they should reflect the costs incurred by the bank (probably minimal in this electronic day and age) and also act as a deterrent. Personally, provided charges are advised to customers, say on an annual basis and maybe customers that do exceed their overdraft are given a warning and a fixed time to get back within the authorised limit, say a week, before charges are imposed, what's the problem.

 

[chimneys]

No Tim you are confusing this issue with unfair credit agreements and there is a trial of 12 cases next week. Watch this space.

After the result today, you dont honestly expect the banks to lose that one do you?! And if they do they will rightly fight that one until the cows come home. That would be one where the rest of us will suffer if the few succeed.

I dont suggest you plan on retiring on your commission just yet!In fact, if punters fail with the banks, maybe they should sue the IFAs who in many instances recommended the loans/mortgages in the first place.

"Unfair" credit agreements!

 

[chimneys]

Yes but people are paying their debts infact over paying their debts so the level of debt in this country has not been an issue. We are in the shit due entirely to the banks here and in the usa losing trillions of pounds in the us housing market. The banks have not lost money in any degree in uk property. the sub prime market here was about 2% at its peak in 2006/2007. In the USA lenders did self cert mortgages for 95% and the whole thing was unregulated.

Basically they held a mirror in front of the client and if thay had a 5% deposit and the mirror steamed over they lent the money without any checks.

(This is not personal US, its just with your profession, this sort of post pushes my buttons!).....

How about IFA contributory negligence? Might not have been you, but many IFA's recommended absurd mortgage products to those who could never afford to keep up the payments in the event of a recession.

Yes the banks are very much to blame, but the finance industry hangers on, happy to pick up the crumbs thrown down from the bankers' table in the good times, also had a role to play in the state we are now in!

 

[Uncle Spielberg]

No they are completely different things. The UCA challenge is based on the fact the contracts are flawed and did not follow the consumer credit act or the fact many lenders can't even provide a copy of the agreement when asked automatically making it nul and void. totally different to bank charges. We will see.

 

[Uncle Spielberg]

(This is not personal US, its just with your profession, this sort of post pushes my buttons!).....

How about IFA contributory negligence? Might not have been you, but many IFA's recommended absurd mortgage products to those who could never afford to keep up the payments in the event of a recession.

Yes the banks are very much to blame, but the finance industry hangers on, happy to pick up the crumbs thrown down from the bankers' table in the good times, also had a role to play in the state we are now in!

You are spreading the myth again. What evidence do you have to back this up. Repossessions are about 50% this year of the predicted level also this country is heavily regulated.It is completely different to the USA scenario.

 

[chimneys]

No they are completely different things. The UCA challenge is based on the fact the contracts are flawed and did not follow the consumer credit act or the fact many lenders can't even provide a copy of the agreement when asked automatically making it nul and void. totally different to bank charges. We will see.

If that is in response to me, I know! We have done this discussion before when you were offering to help the hard done by, who knowingly signed up to loans/mortgages, but now, via "clever" lawyers, are looking to get off loan repayments on a technicality.

Wouldnt have a problem with it, except (as with spurious personal injury claims) its at the ultimate cost to the rest of us via higher charges/premiums.

 

[Super Steve Earle]

Banks are just a conduit for peoples income & expenditure. It's up to customers to manage their accounts-if they expect the bank to do it then they pay the published tariff. After all you wouldn't go in to M & S for a shirt & socks, pay for the socks and think about paying for the shirt sometime when you feel like it. If you take money that isn't yours i.e.exceed o/d facility, you should expect to pay for the bank to decide how you pay it back. Good, careful customers are rewarded with no charges. Bad, lazy customers pay the price. Suits me.

 

[Uncle Spielberg]

If that is in response to me, I know! We have done this discussion before when you were offering to help the hard done by, who knowingly signed up to loans/mortgages, but now, via "clever" lawyers, are looking to get off loan repayments on a technicality.

Wouldnt have a problem with it, except (as with spurious personal injury claims) its at the ultimate cost to the rest of us via higher charges/premiums.

For the record I got lots of enquiries but have done NO applications from NSC. Therefore I have earned NOTHING. It is a facility I offer clients if they want to pursue it. I do not make a judgement or take any high moral ground. It is the clients choice. However if you had walked in my shoes in the last 2 years you would find you have very little sympathy for the banks and the high street lenders.