HSBC and First Direct scrap unpaid transaction fees
HSBC and First Direct will no longer levy a fee of up to £25 when transactions are left unpaid due to insufficient funds.
At present, when HSBC and First Direct decline to honour transactions because customers have insufficient funds (or will exceed their overdraft limits), these banks levy a fee of up to £25 per offence. These fees apply to 'bounced' cheques, dishonoured direct debits and rejected standing orders.
However, from 24th November these penalty fines will become history as HSBC reviews its overdraft structure for personal current accounts.
The global giant describes this move as "part of its drive to simplify products and reward long-term relationships". It goes on to state that this removal "is the first step in a review which will lead to a simpler and more straightforward overdraft service for HSBC and First Direct’s personal current account customers". Further changes to the overdraft service will be announced next year.
The removal of unpaid transaction charges applies to all HSBC current accounts which levy such charges, including:
- HSBC Advance
- Bank Account
- Current Account
- Graduate accounts
- HSBC Student accounts
Any unpaid transaction charges incurred up to 24th November will still be payable and these fees will be debited in December, 21 days after being pre-notified to customers. Until withdrawn, these penalties remain as follows:
- No charge for declined transactions of less than £10.
- A £10 charge for declined transactions up to £25.
- A £25 charge for declined transactions above £25.
A £200 million-a-year racket
According to UK banking regulator the Financial Conduct Authority, British banks make an estimated £200 million a year from unpaid transaction fees, yet HSBC has broken ranks by scrapping them.
Then again, these fees are just one of a plethora of penalties banks levy on customers who go into the red. The Office of Fair Trading estimates that banks raked in a whopping £2.6 billion in 2009 from unauthorised overdraft fees. Despite this, the Supreme Court ruled in 2009 that the OFT could not rule against these charges (as it had previously done with unfair credit card penalties).
Compare the current accounts with the best overdraft deals
What other banks charge
The UK's big four banks (Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland) control around three quarters of personal current accounts.
Here are the unpaid transaction charges currently levied by the UK's main banking groups (sorted from lowest to highest fees):
|
Bank |
Unpaid item fee |
Limits |
|
£6 |
Maximum daily charge of £60 (for 10 or more declined payments) |
|
|
£8 |
Maximum daily charge of £40 (for five or more declined payments) |
|
|
Halifax |
£10 |
Maximum £30 per day (for three or more declined payments) |
|
Lloyds |
£10 |
Maximum £30 per day (No fee for payments below £10) |
|
£15 |
Maximum monthly charge of £75 (for five or more declined payments) |
|
|
Co-operative Bank |
£15 |
Maximum quarterly charge of £150 (for 10 or more declined payments) |
|
HSBC and First Direct |
Up to £25 (depending on value) |
Maximum monthly charge of £150 (Maximum one charge per day) |
|
£25 |
Maximum monthly charge of £150 (for five or more declined payments) |
A right rip-off
As you can see, unpaid transaction fees vary widely between banks, ranging from £6 per item at NatWest and its parent RBS to a hefty £25 at Santander. With some banks charging more than four times as NatWest for an identical service, this clearly demonstrates what a blatant scam these charges are.
Surprisingly, Nationwide BS and Co-op Bank (both 'ethical', mutually owned providers) charge among the highest fees for returning items unpaid. Both charge £15 per rejection, with upper limits of £75 a month at Nationwide and £150 a quarter at the Co-op.
Hats off to HSBC for scrapping these charges, but it's high time that these swindling fines are scrapped entirely.
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Comments
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Good riddance to sharp practice. It cost me a small fortune and made my situation worse and my life a misery in the days when I had cash flow problems arising from unemployment. I hope Lloyds will follow suit, although I am able to manage my account so as to avoid charges nowadays. It's all very well for smug contributors to say you should make sure you are in funds, but if you have no ready funds and as Direct Debits cannot usually be stopped, what are you to do? Advance warning to the bank does not make any difference. I've had to pawn stuff and rush to my Branch to deposit the (petty) cash before now. Those days are over, I hope, but I haven't forgotten.
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The last bounce I had from Natwest was £25 so they must have dropped their fees since then. In general I agree with the bank charging the fees, but they should be negotiable rather than set in stone. As an example, I once had an account with Barclays and my salary was paid in the last Thursday of every month. One month, after being with Barclays in good standing for over two years, my salary went in the day after three of my direct debits were due to come out and Barclays charged me £75 (£25 each). I went to the branch to negotiate but they refused, which resulted in me closing my account with them. Had my salary not been paid in on the usual day then I would not have expected Barclays to refund me. I expected them to see my regular salary going into the bank and knowing that the payments would have gone through had they tried them again a few hours later. That was back in 1996, and they are still chasing me for that £75! I have told them that I refuse to pay it but I suppose they hope to wear me down. Not a chance!
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I suppose I agree with aspects of all four previous comments. Good that HSBC are scrapping the excessive charges, but I think they should still make some charge to cover any administrative work. Occasionally I have in the past gone overdrawn accidentally and been a victim to the charges, but I now realise it is the onus on the customer to check regularly (especially if they are quite near the borderline on their account) to ensure they do have funds. I agree there should be a larger charge for 'bounced' cheques than the non-payment of an automatic direct debit etc, and maybe £5 or £6 for that. But the charges for a fully automated 'dishonoured' transaction should be much less. Also , maybe a sliding scale - the first such charge in a 3-month period should be minimal with the customer sent a warning, then if he or she doesn't heed that then slap on a greater charge next time. The very occasional miscalculation can purely be by accident.
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18 November 2013