Is the financial regulator controlled by the banks? We question the FSA's motives for its bizarre and awful handling of penalty bank charges.
Regarding bank charges, I have already summarised the latest situation in What's Happening With Bank Charges? The key point is that the Financial Services Authority (FSA) has granted a waiver to the banks that allows them to stop dealing with claims until the Office of Fair Trading's `super-claim' is settled.
Furthermore, the FSA has stopped the Financial Ombudsman Service (FOS) from handling claims, and it successfully encouraged the courts to stop handling most claims too, for the time being. (The courts didn't need much cajoling anyway. It seems they weren't happy with thousands of people exercising their rights to swift, affordable justice.)
But a few months ago, Lloyds TSB changed its charges in a way that will mean some customers will pay more. The FSA told Lloyds it shouldn't have done this, because it was in breach of the conditions of the waiver. So what did the FSA do about it? Nothing. It didn't tell Lloyds to backtrack. It didn't fine Lloyds. And it didn't rescind Lloyds' waiver. Absolutely nothing.
I have no faith in the FSA. Its motivation (in many areas, not just on bank charges) is often hard to ascertain. It could simply be laziness or incompetence that is the cause of its dreadful decisions. It'll never tell us anyway: the FSA is in contact with the banks all the time, but, sadly, us consumers don't have the same opportunity to invite them out for a few friendly drinkies.
Of course, that's another possible reason for some of the FSA's awful decisions. Whoever has its ear has the power. It reminds me of an episode of Yes, Minister, where Sir Humphrey says:
"All government departments are lobbies for the pressure groups they deal with. The Department of Education lobbies the government on behalf of teachers, the Department of Health lobbies for the doctors and hospital unions, the Department of Energy lobbies for oil companies and so on. Each department of State is actually controlled by the people it is supposed to be controlling."
In other words, the Department of Education set up the comprehensive education system to please teachers, not parents and children, because the National Union of Teachers talks to it all the time. The FSA is a government department (or sub-department) too. I think a case could easily be built to show that it often lobbies for the banks, rather than regulating them.
What can we do about it? I don't know. Almost certainly nothing. But the Lloyds development is a further strong sign that bank charge claimants can't rely on the FSA (or the FOS, as it's overseen by the FSA).
It's not like me to rant about government bodies or anything else, but in this instance I think I have reasonable grounds; it gives you my reasons for re-stating my advice with added conviction. That advice was: you should consider registering your small claim in a county court, even if it will just get `stayed' (put on hold). I gave my reasons in What's Happening With Bank Charges?
In other bank charges news...
The Office of Fair Trading's penalty charges claim begins next week on Monday 14 January 2008. When it will end is harder to foresee. Perhaps we'll be lucky and a final decision will be made this year. Or, more likely in my opinion, the banks will find ways to drag the case out for longer, perhaps for several years.
Also from 14 January, claimants in Scotland will be able to claim four times as much in the small claims track, as the normal limit rises from just £750 to £3,000. In England and Wales the limit is usually £5,000 for small claims.
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