A judge has decided that an HSBC manager unlawfully held an overdrawn customer in a private office of one of their branches...
Most people have had that feeling of being trapped in an overdraft – especially in the current financial climate. But one lady's visit to her local branch of HSBC three years ago took this feeling to a whole new level...
Locked up
In October 2008, 59 year old widow Josephine Lewis popped into her local HSBC in Wootton Bassett to complain about the spiralling overdraft fees the bank had been charging to her account.
After becoming upset in one of the private interview rooms of the branch – which had been locked for privacy – she told the HSBC employee she was with that she wanted to leave. But, according to the BBC, when she did this branch manager Chris Hicks leapt up and blocked the door, preventing her from escaping.
After half and hour she was eventually let out of the room by bank cashier staff after they heard her asking to leave.
As a result of these actions, HSBC was forced to cancel the whole of Miss Lewis’ £2,070 overdraft after a judge decided that she had been unlawfully imprisoned.
Rachel Robson highlights three ways to tackle your overdraft and get rid of it for good.
And Miss Lewis’ illegal detention wasn’t the only wrongful deed perpetrated by the bank...
Harassed
Judge Cronin, sitting in the Swindon County Court also decided that HSBC had continually harassed Miss Lewis with hundreds of phone calls that only ended when she started legal proceedings. Some of the calls were reported to have been of a threatening nature with bank staff telling Miss Lewis that they would only stop contacting her when she cleared her overdraft.
In addition, HSBC was found to have breached their contract with Miss Lewis by failing to initially inform her of the applicable overdraft charges. What’s more the bank also failed to freeze Miss Lewis’ account after she had asked them to put a stop on all new payments.
Judge Cronin stated that if Miss Lewis had claimed for damages relating to her imprisonment and harassment, she would have been awarded a £1,500 payment. That’s in addition to the £2,070 of overdraft debt the bank was ordered to write off.
In response to the judgement, HSBC apologised to Miss Lewis and stated that she was free to leave at anytime throughout the Wootton Bassett meeting in 2008.
Whether or not you agree with the Judge’s decision to cancel Miss Lewis’ overdraft, it’s undeniable that there are some huge overdraft fee structures floating around nowadays. And if you’re not careful, they could land you in a huge financial mess.
Worst offenders
Back in January we reported on the increasing tendency for banks to levy fees, as well as interest charges on arranged overdrafts. Indeed, many providers will now apply a monthly flat charge if you go into the red – even if you’ve already told them that you need an overdraft buffer. When combined with high interest rates – often in the region of 20%, these flat fees can quickly escalate into huge spiralling overdraft charges.
Here are some of the worst offenders for hefty arranged overdraft rates:
|
Current Account |
Interest |
Overdraft charges |
Other fees |
|
Lloyds TSB Classic |
19.3% |
£5 per month |
|
|
Norwich & Peterborough Gold Classic and Light |
17.9% |
£5 per month |
|
|
Northern Rock |
11.9% |
£7 per month |
|
|
HSBC pay monthly |
19.90% |
|
£15 per month account fee |
|
NatWest Advantage Gold |
19.49% |
|
£12.95 per month account fee |
|
Bank of Scotland/Halifax Reward |
|
£1 per day |
£12.50 per month account fee |
Source: Moneyfacts.co.uk and provider sites
And if you breach your authorised overdraft, you’ll have to shell out even more in both penalty fees and interest. Here are some of the highest rates for unauthorised overdrafts:
|
Provider |
Current Account |
Interest |
Overdraft charges |
|
Bank of Ireland |
Clear Account Level 1 |
9% ABR per annum + 1.5% per month |
£19 per month + £21 per day |
|
Clydesdale Bank |
Signature, Plus |
29.99% |
£25 per month + £25 each time OD increases |
|
The Co-operative Bank |
Privilege |
29.97% |
£25 per month + £20 each time OD increases |
|
The Co-operative Bank |
Current Account |
28.65% |
£25 per month + £20 each time OD increases |
|
Cumberland BS |
Standard |
23.14% |
£20 per month |
|
Halifax |
Reward, Ultimate Reward, Standard |
18.90% |
£5 per day |
|
Leeds BS |
Premier |
17.90% |
£10 per month |
|
Lloyds TSB |
Most basic accounts (not gold, platinum, student, premier) |
18-20% on basic accounts 10-18% on selected accounts |
£5 per month + £10-£25: £5 per day £25+: £10 per day |
|
Nationwide |
FlexAccount |
10.40% |
£20 per month |
|
NatWest |
Current Plus, Advantage |
10.40% |
£6 per day |
Source: Moneyfacts.co.uk
Now, while it’s undeniable that the above fees are astronomically high, it’s still hard to condemn banks for levying hefty charges on unauthorised overdrafts. After all, if you are planning on borrowing your banks money and heading into the red – you should really let them know first!
But I personally see nothing wrong in occasionally using an arranged overdraft. They can be a vital lifeline if an unexpected bill comes in before payday and are usually cheaper and easier than using a credit card.
That’s why it’s important to take a close look at overdraft charges when shopping around for a current account.
Safer bets
Here are some of the best accounts around at the moment for overdrafts:
|
Account |
Overdraft charges |
In-credit interest |
Other info |
|
0% on arranged overdrafts for 12 months |
5% for 12 months on balances up to £2,500 |
Must pay in at least £1,000 per month and have two direct debits or standing orders |
|
|
0% £200 overdraft |
0% |
Must pay in £800 per month |
|
|
0% £500 overdraft for 12 months |
0.12% |
|
|
|
0% £250 overdraft |
0% |
Must pay in £1,500 per month |
|
|
0% for first three months |
0% |
Must switch all direct debits and standing order to Nationwide |
So Santander is offering the best initial deal charging 0% on all arranged overdrafts for 12 months. They’ll also match your existing overdraft up to £5,000, depending on your credit situation.
[SPOTLIGHT]The only caveat to this is that you will have to pay at least £1,000 per month into your account and switch two direct debits or standing orders over to be eligible. In addition, Santander has just extended its £100 cashback offer for new customers who open an account online and use the bank’s dedicated switching service.
First Direct is also offering £100 to new 1st Account customers, providing you switch your income of at least £1,500 to the account within three months of opening it. And what’s more, if you’re unhappy with your account and decide to ditch it within 6 months – First Direct will pay you another £100 when you leave!
What do you think?
Should Miss Lewis have had her overdraft written off?
Let us know in the comments box below.
More: Get a 0% overdraft account | The best accounts for overdrafts | Get cashback with your current account