Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Although the wheels of Britain's legal system invariably grind slowly on key judgments, the Supreme Court's decision this week to reject the long campaign by customers of high-street banks to regain billions of pounds of charges was perfectly timed.
For while the highest court in the land ruled that the Office of Fair Trading does not have the authority to determine the fairness of bank charges on unauthorised overdrafts, some 2.8 million small shareholders of Lloyds Banking Group were being asked to stump up another £13.5 billion in its latest rights issue.
At the same time, it emerged that when they put billions into the pot to keep Lloyds afloat last autumn, HBOS bank - which Lloyds TSB foolishly acquired - was in such a parlous state that only a secret Government loan of £25b kept it afloat to avert a second Northern Rock-style national panic.
Small shareholders and, I fear, many pension funds which held tranches of Lloyds TSB and Halifax shares for generous dividends, have seen billions of pounds of wealth evaporate in both two banks.
Against that background, would it have seemed entirely fair to sanction the refunding of charges paid since July 2001 - some of it possibly direct from the latest tranche of money dragged from reluctant shareholders whose only crime was to invest for their old age?
While bank bosses pay themselves ludicrously-inflated salaries and bonuses, of course, many won't see it that way.
"This is a bitter blow for millions who have been waiting patiently to get their money back," says Peter Vicary-Smith, chief executive of consumer rights group Which?
At Moneyfacts.co.uk, Michelle Slade believes the Supreme Court's shock decision will leave some consumers even more disillusioned with banks.
"It seems surprising that a £35 charge for, in some instances, being a few pence overdrawn is not regarded as unfair," she says.
But Annie Shaw of the website CashQuestions.com hailed "a triumph for common sense".
"Customers entered into contracts with banks willingly, knowing the terms and conditions," she says.
"If banks had known before that they would not be allowed to make high charges for unauthorised overdrafts, they might have chosen instead not to lend at all, resulting in cheques being bounced and direct debits being refused."
Could this court ruling mark a landmark moment in the running of our financial affairs?
Until now, when sustained campaigns built up, a suitable pot of compensation cash has usually been found. Goodness knows where from, at times, but it kept most of the people happy in the end.
With banks in such an enfeebled state, compensation money this time can only be dragged from shareholders, or from taxpayers forced to become owners of the weaker banks.
Did they really deserve that when, as Which? calculates, around 12 million bank customers could have boarded the latest compensation bandwagon to claim £10b if the Supreme Court had ruled the other way.
Although savers outnumber borrowers by six to one, their interests may be prevailing for the first time since the financial world went pear-shaped in 2008. For those whose accounts stay in the black, a further reward could be the survival of free banking.
However, solicitor Daniella Lipszyc, of Ultimate Law, accuses high-street banks of playing a key role in encouraging many people to build massive debts.
"It is rare for me to see a client with only one loan," she says. "In so many cases, they were rung up by banks suggesting they might like to borrow a bit more, and before a client knows it, all the loans are refinanced into another big loan with credit cards thrown in.
"I don't absolve many of my clients from their problems, but the financial distress many face is largely down to the banks."
Lipszyc fears that thousands of people expecting some compensation may be forced to refinance yet again. Where overdraft limits have been reduced, they could face fresh charges for unauthorised overdrafts.
How do bank customers play it from here?
Firstly, some lenders - notably including the nationalised banks - have significantly cut charges when overdraft limits are exceeded.
Royal Bank of Scotland has cut some charges to £5, but a more standard charge is £12 per item, while the unauthorised overdraft remains.
Charges from now on will need to be more transparent and, most probably, lower than they have been in the past.
Secondly, the 'stay', or delay, which the Financial Services Authority put on serious overdraft disputes is ended by this Supreme Court judgment.
In due course, banks will contact consumers to discuss the resolution to their complaint.
Customers who can prove they are in financial hardship are entitled to fair treatment. If they don't get it, they can go to the Financial Ombudsman Service.
In essence, millions of customers will have to slash costs and strain every sinew to get their overdrafts down, even though Christmas is coming.
A strong incentive to do that is the highest overdraft rate - around 19% - since 1995, which might even justify a call for temporary subsidy from the Bank of Mum and Dad.
"While you can't get money back for charges already paid, you should assess your situation to see if it is feasible to switch to another provider if you are dissatisfied," suggests Which? personal finance campaigner Phil Jones.
The standard advice from Which? is not to pursue the claim any further, even through many claims specialists make no upfront charge, and only take money in the event of a compensation payment. Some bank customers might also form groups to take county court actions against banks for lending them too much.
Carl Wright at Cartel Client Review, a specialist claims company operating on a 'No win, no fee' basis, says he is continuing to get charges refunded for clients: one got more than £10,000 earlier this month, refunded by Halifax and NatWest.
Kevin Mountford at moneysupermarket.com stresses the need to find a new provider, if you don't like your present one. An overdraft won't make it impossible to move your account.
"When you have a complaint outstanding, leave that account open and open another elsewhere," he says.
"There must also be a benefit, certainly in sharing costs, to join other people making a similar complaint to your own.
"One good thing coming from all this is pressure on the banks to change the landscape of current accounts, and this may be already happening."
Launched ahead of the Supreme Court ruling, the Zero Current Account from Santander (Abbey) is a clue to the new hybrid: it promises no overdraft fees, no unauthorised charges, no charges for paid or unpaid items.
Customers going overdrawn face a rate of only 12.9%, with a credit interest rate of 6% applied for year one.
Although the account will only be offered to existing customers of Abbey, Bradford & Bingley and Alliance & Leicester (when it rebrands) in 2010, the Zero will be available from January to anybody holding a mortgage with the bank or set to open one.
Mountford expects current-account banking to change fast from here.
"Like Santander's Zero, I expect banks will be keen to reward loyalty, with best offers tending to go to those who take multiple products," he says.
"On the other hand, banks will do less for those customers who generate very little profit for them."
:: Information: Register for Santander Zero account on 0800 234 6058; Ultimate Law (0161 710 2030 and www.ultimatelawltd.com); Updated advice for bank customers making a claim can be found on www.which.co.uk; Cartel Client Review (0845 659 6000 and www.cartelclientreview.co.uk).
Poundnotes
:: Even though Premium Bond prizes were boosted to 1.5% per annum from October 1, Andy Gadd at leading financial advisor Lighthouse Group says the holder of £30,000 worth of bonds can expect to win 15 prizes a year.
With 96% of prizes amounting to just £25, that amounts for most people to an annual payout of £375, or 1.25%.
In my case, with a holding not far from that figure, the payout has been three prizes for far in 2009. Somebody else is getting into ERNIE's good books at my expense.
Is it worth it? Not from a pure investment perspective, reckons Gadd.
"However, for those who understand the downsides and are willing to gamble, they are fine," he says.
:: Only 5% of easy-access savings accounts with banks and building societies promise to pay a rate above Bank of England rate (0.5%), says new research from Sainsbury's Finance. It also found that only one in six accounts (17%) offer a rate guarantee.
In contrast, Sainsbury's Easy Saver pays 2.8% gross on balances of £1-£500,000, and there is a guarantee that it will pay at least 2% above Bank of England bank rate for the next 12 months.
Enquiries: 0500 405 060 and www.sainsburysbank.co.uk.
:: Homebuyers who ended fixed-rate loan periods and switched to standard variable rate (SVR) are paying an average 4.7%, says Hannah Mercedes-Skenfield at Moneysupermarket.com. She reckons lenders have steadily bumped up SVR rates because borrowers are too lazy to notice.
Anybody with at least 20% equity in their home would probably get a better deal on a three-year fix, Mercedes-Skenfield reckons, although there may also be an arrangement fee of £1,000 or so to get onto it.
:: Wait for hard-up Chancellor Alistair Darling to chip back tax relief available on pension contributions, says Tom McPhail at financial advisor Hargreaves Lansdown.
He advises any employees to pay a pension contribution for this year before December 9, because Darling may well reduce the tax break to shrink the amount going into your retirement pot in his pre-Budget Report.
"One of Gordon Brown's first acts as Chancellor was to scrap the dividend tax credit for pensions, and in April this year they took away tax relief for higher earners, so it's not worth taking the risk," says McPhail.
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
Skipton BS 0845 717 1777 5.35% (F) Fixed Rate Bond 30/11/14 £500 Yly
Halifax www.halifax.co.uk 5.25% (F) Web Saver Five Years £500 Yly
Investec Bank 0845 366 6333 3.37% High 5 Three Month (P) £25,000 Yly
West Bromwich BS via branch 3.31% Branch Bonus 2 Instant £100 Yly
Manchester BS 0161 923 8015 3.31% Premier Notice 5 35 Days £1,000 Yly
:: Top-five borrowers
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 2.49% discounted for two years 60% £999 Yes
First Direct (Rem) 0845 610 0100 2.99% variable for term 60% none Yes
ING Direct (UK) 0845 603 8888 3.09% for term 75% £695 Yes
Co-operative Bank 0800 633 5286 3.24% to 31/01/13 75% £995 Yes
The One Account 0845 610 1060 3.75% for term 75% none Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
