"It is a fresh blow to British banks which have been accused of taking billions of pounds of taxpayers support which they kept hold of to repair their balance sheets rather than passing onto customers through better rates on mortgage and savings deals.
The study carried out for the European Commission criticised Europe’s banks for their complex price structures and poor service.
It said British banks charge an average of £93 a year for running a current account, seventh most expensive out of a list of the 27 European countries. The most expensive is Italy, charging £229, and the least expensive is Bulgaria, charging £24 a year.
While customers at British banks can access free current accounts, there are options that allow them to pay a monthly fee in return for current account packaged with other benefits such as insurance. The charges that banks apply to overdrafts also vary widely.
The Commission said “opaque” fee structures were inhibiting bank customers from taking up their right to switch banks.
Only 9 per cent of European consumers switched current accounts in the past two years because confusing information about current accounts makes it impossible to compare different offers among banks.
Europe’s Consumer Commissioner Meglena Kuneva Retail bankers are letting consumers down.
She said: “There is widespread evidence that basic consumer principles are being violated with problems from complex pricing to hidden charges and information that is unclear and incomplete.”
Banks’ borrowing costs edged towards the same level as the Bank of England interest rate yesterday, the first time since before the credit crisis as the profits lenders make on mortgages continues to grow.
The rate at which banks lend to one another, known as the London InterBank Offered Rate, dropped further this week, reaching 0.57. It has fallen gradually from double that amount at the beginning of July.
At the same time, the Bank of England has kept interest rates on hold at 0.5 per cent and experts suggested Libor is just days away from falling to the same level.
But while lenders are enjoying a low cost in wholesale borrowing, banks are refusing to pass on the savings to borrowers, with customers paying an average of 3.8 per cent on a two year tracker.
Also, British high street banks also topped a list of lenders offering the worst customer service.
Halifax, Northern Rock and Abbey were named as providing customers with the least satisfaction. Barclays and Royal Bank of Scotland also provided also performed badly in the list compiled by consumer group Which?
Smaller lenders, including First Direct, Coventry Building Society and Britannia Building Society, triumphed with the highest scores, with customers praising the lenders for keeping them informed and for the overall cost of their deals.
Halifax was the worst performer with a satisfaction rating of 45 per cent while First Direct was the best obtaining a score of 91 per cent. The average score was 62 per cent, up from 58 per cent a year ago.
Michael Coogan, director general at the Council of remortgage Lenders, said: “It is good news that consumers are increasingly satisfied with their lenders. Lenders have been working hard, under very challenging market conditions, to communicate effectively with their borrowers and treat them fairly. These efforts are bearing fruit, as this survey reinforces.”
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( 3 / 523 )There has been much talk recently that the recession could be nearing an end as the housing market picks up. However reports that the level of unemployment is declining seem to be untrue and infact recent figures show that those unemployed in Britain has hit a high of almost 2.5 million.
"It's a conundrum: central bank chiefs such as the Bank of England's Mervyn King and the US Federal Reserve's Ben Bernanke say the recession is over, yet unemployment on both sides of the Atlantic continues to rise rapidly, with Britain's jobless rate hitting a 13-year high of almost 2.5 million last week.
So what is going on? We have no proof yet that recession – commonly defined as two consecutive quarters of contraction in the economy – is over, although all the signs are that many major economies will return to growth in this quarter. In Britain's case, that will end a run of five quarters of shrinkage.
But, as King made clear last week, that is far from the end of the story – it certainly isn't time to plan a party, except possibly in some banks where the bonuses are flowing again.
The key thing to remember is that in this recession Britain has seen its total output of goods and services slump by more than 5%. So just because we may grow by, say, 0.4% in the July to September period, it doesn't mean normality has returned. It will take many quarters of that kind of growth to make up for all the lost output, hence it will be a long time before joblessness stops rising, let alone begins to fall.
There were, however, encouraging signs in last week's labour market data. The number of new redundancies each month has levelled out and the number of job vacancies has stopped falling although unemployment is likely to top 3 million next year.
So if the recession is over, what's to worry about? Plenty, and King was right last week when he said the pace of any recovery was "highly uncertain". His Bank monetary policy committee colleague David Miles said on Friday: "This is going to be a protracted period of a return to a more normal level of activity." He believes we may remain in recession for another six to nine months.
The latest lending trends report from Threadneedle Street, published last Friday, also made for alarming reading. It showed a record fall in bank lending to British firms in July. In spite of the taxpayer bailouts, banks are not keeping to their word that they would support a recovery. There have been huge efforts by the government and Bank of England to get banks lending again, but it simply isn't happening – making a sustainable economic recovery almost impossible.
Retail sales figures last week were also very subdued, suggesting people remain cautious about spending if they are worried about losing their jobs. Even those in secure jobs are preferring to pay off their debts. All these factors can weigh on the economy for several years, especially if whichever party wins the next election tightens fiscal policy too much and too quickly, as the Tories look likely to do. This is where the danger of a so-called double-dip recession comes from."
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( 3 / 543 )You may be suprised to hear that Tunbridge Wells in Kent is becoming the number one area in the Country for debt. The reason for this has been given as Europeans moving over with their debts in order to help clear them!
"Easy access to Eurostar links to Continental Europe, cheaper rents than London, "and a very nice area" have all attracted Europeans crippled with debts to settle in Kent, with many choosing Tunbridge Wells.
As long as a person has lived in Britain for six months, they can be declared bankrupt in a British court, writing off their debts just one year later. This compares to a wait of seven or even nine years in Germany.
And with any EU national allowed to live in Britain, accountants said they were not surprised that Europeans had discovered a quirk in the legislation which allows them to wipe out debts incurred in Italy, Austria or Germany in a British court.
Mark Sands, the head of bankruptcy at Tenon accountancy, said: "It's an obvious move to make if you are German. As long as you can show you have lived here for six months you can declare yourself bankrupt and pop on a plane to go home.
"The European directive was designed to allow multinational companies to settle their debts, not individuals. I suppose it is a law of unintended consequences that individuals have taken advantage of it."
Last year he advised a German pilot with debts of £100,000 to move to Britain to clear his debts.
Tunbridge Wells has proved particularly attractive thanks to a specialist company, run by a German, setting up shop in nearby Erith. Insolvenz Agentur, run by Marcus Kray, advises German and Austrians how best to take advantage of British bankruptcy laws, as well as help with relocation and finding a job. The fee is €7,000 (£6,323).
His company's website promises bankruptcy tourists "Get rid of the rest of your debts in England after just 12 months".
He said: "Tunbridge Wells is near the Eurostar terminal in Ebbsfleet, which allows you to go to Continental Europe very easily. Kent is a nice area, the garden of England, and Tunbridge Wells is a very nice town. Also the rents are cheaper than in London."
He said most of his clients were successful professionals, including doctors, dentists and accountants. "None of them is taking Jobseeker's Allowance," he said, though one or two are retired and living off their European pensions.
One of his clients, an Austrian management consultant, managed to accumulate debts of £16 million, which were completely cleared by a British court.
He said: "The majority of my clients are German or Austrian – they have realised it is so much easier in the UK to have their debts cancelled so they come here.
"I spotted the gap in the market because many Germans have to wait for up to nine years to become bankrupt.
"It is a process that takes far too long. But in the UK you can be declared bankrupt in under a year and then go home after six months. It is a very attractive solution."
Many stay on for longer, he added. "They like the quality of life and the low taxes in England."
If you have debts then you may like to consider an IVA as a legal and government approved method of resolving debt that avoids the consequences of bankruptcy. If you owe over £15,000 to three or more creditors and can't afford to meet the repayments then you may be eligible for an IVA.
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( 3 / 285 )Those in debt will probably be the first to admit that obtaining credit and loans has become easier then ever and has little relation to how much you earn or could afford to pay back. For this reason it has been suggested that in order to stop personal debt becoming unmanagable, there should be a limit to the amount you can borrow if you cannot afford to be doing so.
"As personal debt has been easier to obtain, the amount has grown and grown and, like most things, you can overindulge.
Being in debt can bring huge stress, cause breakdowns and families to break up, and, as we know, it's been at the centre of the financial crisis.
Yet, not so long ago, getting a loan wasn't easy and credit cards and store cards didn't exist. We don't want to return to this era, but people have to be stopped from taking on debt they can't afford - it has to be capped. It has to be related to salary, savings and other debts, because we've ended up in the position where debt is controlling us, rather than us controlling it.
A lot of debt that appears personal can, in fact, have a wider impact - just look at the housing market! Despite the 20% fall in house prices many first-time buyers are still unable to get on the property ladder. It was the massive take up of debt encouraged by lenders, which drove prices to unrealistic levels - and they still are unrealistic.
So the debt of others has created a barrier for first-time buyers. Had loans been properly capped, prices would not have risen so far. On a more personal level, all parents want to do their best for their children. And this should mean starting out life without debt.
But society seems to be happy to let debt accumulation start at university. It's all the more dispiriting that higher education, the bedrock of future prosperity and a more secure society, is paid for via debt, rather than through taxation, especially when the UK has grown increasingly wealthy.
Changing this system won't be easy, but we need this situation reversed. Debt should be available to most, but it's highly-questionable whether it is wise to allow debts to build up before you've even started work.
Capping debt is not going to be popular, as it means less of it, which means less consumption and, crucially, less instant gratification. Persuading people to wait and save before they consume is a tough one, so it needs regulation.
Funnily it's the mortgage market that is the best example of capping. Although it got out of control, the principle is widely accepted that borrowing is related to ability to pay, so why not extend this across a range of loan activities? Clearly, the idea of "capping" is out there, but seldom applied. I found this out when I asked my bank if I could borrow some money and spent an hour answering questions - having agreed how much loan I could have, they never once asked how I would repay it. Happy days - provided I could pay the interest!
The politicians need to step in and ensure that lending is based on sensible criteria. But they aren't going to like telling the electorate they'll have to consume less - it's just not a vote winner even though its common sense and self evident.
But a less-indebted society is better for everyone - it's time to control debt again and not be ruled by it.
No says David Black banking specialist at Defaqto
If your boiler packs up and your car needs urgent repairs, have you got the cash available in your bank account to sort it out? If you haven't, you've got two choices - get used to cold baths and no car, or borrow the money to fix the problem.
Credit cards, overdrafts, personal loans and mortgages can be incredibly useful both to tide us over at times of need, and also to facilitate purchases of necessary items.
For some reason, many people think that debt has become a dirty word over the course of the last year or so, but, treated responsibly, it remains a natural ally and a useful tool in today's society.
Bad debts are something that lenders are very anxious to avoid and they have adjusted their underwriting requirements to minimise future risks as much as possible. They also have better knowledge, and make better use of, each applicant's financial status and overall level of indebtedness.
Many now base their decision on whether to lend, and, if so, how much to lend, on affordability - which takes account of income as well as financial expenditure and obligations - rather than merely basing decisions on overall income.
What this means is that it's going to be much more difficult for individuals to "over-borrow" moving forwards, as available credit from mainstream sources will restrict personal debt to the level that the individual can both afford and service. The lenders have very definitely learnt bundles from the recent financial malaise, and will do their utmost to ensure that they don't lend excessively in the future.
Many also monitor their existing borrowers, and it is not at all unusual for a lender to reduce a credit card limit or close a card account.
The maximum amount of debt that is appropriate will clearly vary considerably from individual to individual and it would be churlish for the nanny state to impose an arbitrary "one size fits all" limit on personal debt.
One can imagine the outcry if it was decreed that no one individual could have a debt greater than, say, £10,000 in unsecured debt and £200,000 for mortgages. Such would have massive ramifications on many aspects - including both the economy and the property market - which are heavily reliant on credit availability"
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( 3 / 268 )For those with a Halifax account you may be pleased to hear that penalties for overdrafts are about to change. This will mean that depending upon the type of overdraft you have you will be set a daily fee.
"Millions of Halifax current-account customers will have their overdraft charges cut before the end of the year, it has emerged.
The bank, which has more than 5m current-account holders and which was rescued by Lloyds Banking Group earlier this year, will write to most customers next month to inform them it is moving to daily overdraft charges.
Currently, customers are charged £28 a month for an unauthorised overdraft facility, plus fees of £35 for each payment while they are in the red (up to a maximum of three per day).
Under the new structure, customers will pay a daily fee depending on the type of overdraft they have.
Customers who arrange an authorised overdraft of up to £2,500 will be charged £1 a day for each day they use the facility. Those who use an arranged overdraft of more than £2,500 will be charged £2 a day, while those who fall into unauthorised overdraft will be charged £5 a day.
The daily charging structure is already in force for Halifax’s Reward Current account, launched in February. Most of its other current accounts will be switched to the new system in December, with letters going out next month.
However, the Halifax Cardcash, Easycash and Student current accounts will be unaffected.
Several big banks have changed their charging structure for unauthorised overdrafts since a High Court test case was jointly launched by the Office of Fair Trading (OFT) and seven major banks and a building society.
Earlier this month Royal Bank of Scotland (RBS), which also offers current accounts under its NatWest brand, announced it was slashing fees for returning bounced cheques and standing orders from £38 to £5, while fees for paying for goods while overdrawn have been halved from £30 to £15.
RBS has also cut its monthly maintenance charges for unauthorised overdrafts from £28 to £20, with guaranteed card payment fees down from £35 to £15.
The test case is currently being heard by the House of Lords, after the banks involved appealed against an earlier decision that the charges did come under the scope of the OFT"
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