Co-op Breaks FSA Guidelines On Overdraft Charges
The Co-operative Bank likes to think of itself as ethical, but it has changed the method of overdraft charges that will not help customers, and critics say that those with low incomes will hit hardest by the changes, due to come into force in December.
Even worse, the changes seem to be a violation of guidelines as set down by the Financial Services Authority, which ruled that banks could waive refunds for overdraft charges until the end of the dispute between the Office of Fair Trading and eight High Street banks early in 2008. Those guidelines asked banks back in July not to raise their overdraft charges or make adverse changes to accounts.
The Co-op's unauthorised overdraft fees are going to be unchanged at a cap of £100 a month, but its customers - who number nearly a million - might reach the maximum limit in a shorter space of time. Those on benefits could be hit most as they often run out of cash before pay-day is reached and slip into an unauthorised overdraft for a few days, according to the Consumer Action Group, which describes the charges as insidious. The changes brought in by the Co-op lower the flat, monthly overdraft charge, but raise the daily charge of overdrafts and reduce the number of days over which it can be charged.
A customer falling into unauthorised overdraft for three days would previously have been charged £70, but under the new system this has risen to £80. Over a four day period the charge used to be £85 and will now be £100.
A recent letter from the Co-op to its customers, highlighting wider changes to account charges, said: "Please remember you always have the option to close your account if you are not happy with the changes."
Founder of the Consumer Action Group, Marc Gander, said: "These clever changes will hit those people who are eking out a living day by day and go over their limit just before pay-day. This happens an awful lot for people on benefits and people like young single mums, who run out of money just at the end of the month. If you are in a vulnerable group this will happen every month of your life. These changes are likely to break the camel's back for them. The Co-op is just throwing this at them because it knows they have no mobility in their accounts and can't go anywhere else because of their credit rating. This is an insidious charge based on the knowledge that those affected just can't walk away."
The charges seem to be at odds with the bank's 'ethical policy' brought in in 1992, stating: "The commitment to social responsibility that underlies the policy is part of the values that have been passed through the Co-operative Movement since its creation in 1844."
There have been other breaches of the FSA's waiver in the last few months. Lloyds TSB and Abbey have both raised overdraft charges recently. A recent FSA review criticised some banks for changing terms and conditions for overdraft charges.
It seems the banks don't care, with a shoulder-shrugging 'like it or lump it' attitude of supreme arrogance.
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Published on December 3, 2007
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