| Why the Supreme Court is wrong |
[Nov. 25th, 2009|10:50 pm] |
So the Supreme Court today decided that the Office of Fair Trading did not have the power to decide whether bank overdraft charges are fair. And I got myself into a rather heated discussion on whether this was the right decision over on Twitter - which really isn't the best medium for that kind of discussion. ;-)
I'm told the legal basis for the decision is sound, and let's face it, the Supreme Court should between them have the legal expertise to make that decision based on UK law. So here's why I still disagree with it:
[Just went over to Twitter to look some of the discussion and found that the spammers are already in on this one: "Reclaim_UK @elmyra #bankcharges Court Ruling does not stop you from reclaiming your money. For more info http://bit.ly/16YqKD" - colour me amused. I should probably also disclose at this point that I only been affected by said overdraft charges only once, and this really don't consider it worth my time to chase Natwest for the sake of 30 quid.]
So, ![[info]](http://l-stat.livejournal.com/img/userinfo.gif) vampwillow's argument was that people should bear the responsibility for their actions, shouldn't spend money that isn't their own, and should suffer the consequences for unplanned overdrafts. Not an unreasonable position, yet one I disagree with.
My main problem is that the system is unfair: it disproportionately penalises the poor. If you are on a low income and have an emergency which means you need to go beyond your overdraft limit, and then get hit with a £30 charge, that makes getting back into the black so much more difficult. You end up in a vicious cycle.
Sure, says vampwillow - just budget carefully, plan your spending, talk to your bank if you need to borrow more. Well yes. But.
If you're on a low income or benefits, the overwhelming likelihood is that you're not terribly well educated. "current cleared balance + income added at date it clears - expenditure in cash - exp out in next week = effective balance forward" says vampwillow. Simple enough. Yes it is shocking how many people don't even have that basic knowledge of financial management. It doesn't get taught in schools, and most parents don't teach it to their kids - particularly those from a disadvantaged background. And even ignoring the education aspect, simply access to your bank balance may be more difficult if you, for instance, can't afford Internet access.
The next problem I have is that, again, if you're poor, planning your spending is more difficult. You may simply not be able to set aside money for emergencies, and you not have the support network around you to help you out.
And finally to the point on budgeting, even if you plan and budget and the emergency hits you, going to your bank manager and explaining that you're on benefits but need a higher overdraft limit please is likely to be a. embarrassing and b. either futile or expensive. Because being poor is expensive: you get charged more for utilities and you get charged more for credit among other thing. In some of the worst cases, this kind of thing may drive you towards loan sharks. (For an extremely educational experience on the subject of poverty, I recommend a walk through Paisley high street, where every other shop is a bookmaker's or a loan shark.)
Here's another thought. Think about your bank account: the number of transactions that go through it, the debit card you get with it, the cheque book, the online and phone banking, access to branches, and various other bits and pieces. How much do you pay for your current account? Chances are, you pay nothing. That's because the banks use the money they make from charging people for unarranged overdrafts to subsidise "free" banking. Nice for you, if you stick to your overdraft limit, yes? But really, I'm in the 40% tax bracket now. If I was a Tory, I'd have absolutely no problem with this situation, but as it is, I do actually object to my bank account being subsidised by overcharging people on low incomes or even benefits.
And finally, there just isn't a moral justification for banks charging the amounts they do for unarranged borrowing. Yes, spending money you don't have should be discouraged. And yes, there is probably some small administration cost involved in the whole mess for the bank. But the amounts charged in no way reflect the cost, and last I checked the banks were not the police and thus had no power to enforce behaviour or punish. In fact the whole situation is not dissimilar to the proposals in the new "Digital Economy" bill to make ISPs the guardians of copyright law by requiring them to enforce it and disconnect users who may have broken it. Private enterprise and law enforcement should stay well apart.
[And just in case you haven't heard of the Digital Economy bill, or the Three Strikes proposal (it makes me want to spit every time I say/write it), please do wander over to ORG and have a look/sign the petition/phone your MP/leave a message for Lord Mandelson.]
So yeah, I'm against adding yet another poor tax in the form of ridiculously high overdraft charges.
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