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Bank backlash

While the row over the retail distribution review rumbles on, I want to turn this week to another subject – bank charges.

Last week, my new employer carried out one of those ubiquitous surveys used by all companies aspiring for a few column inches in the media.

You know the kind of survey I’m on about – “97 per cent of UK property owners say they would lie to get a better home insurance deal”; or “62 per cent of people would rather put wealth before happiness”, that sort of summery-type stuff.

In our case, we were much more serious, as befits our new publicly-listed status. We chose to look at the various charging options available to banks if the looming test case between them and the Office of Fair Trading results in unauthorised overdraft charges being deemed illegal.

What we found was that 40 per cent of people would prefer to keep the current system, which involves the retention of free banking alongside heavy charges for those who go over their agreed limits.

A mere 8 per cent favoured monthly charges and just 1 per cent wanted to see charges brought in on a per-transaction basis. A surprising 35 per cent favoured none of these options (which seems a bit strange, given that there are no other serious charging choices available) while the rest had no opinion.

In many ways, I was not hugely surprised about the various percentages revealed by our survey. On our own website’s forums, we have increasingly been seeing what can only be described as “the revenge of the silent majority”.

By that, I mean the majority of bank customers who, for the most part, never or only rarely go overdrawn. Until now, while a minority of consumers acted to reclaim charges they deemed to be illegal, this majority has remained quiet.

After all, if the big banks can be stung to the tune of hundreds of millions of pounds by angry punters – egged on by a media keen to have a pop at their allegedly “huge profits” – while still continuing to offer free banking to an unaffected majority, what difference does it matter to them?

The forthcoming test case changes all of that. Two things have happened. The first is that, in a clever move, the banks have called an abrupt halt to the steady drip, drip of “reclaim the charges” negative publicity they suffered over the past year or so, while simultaneously turning off the compensation tap that was costing them a fortune.

The second and, from my point of view, even more important thing they have done, is to have thrown into sharp relief the growing schism that exists between the “reclaimers” and the “anti-reclaimers”.

Suddenly, when faced with the distinct possibility that the test case may find in favour of the “consumer position”, another class of “consumer” has woken up to the reality that the consequence of such a victory may be that they will have to pay quite a lot for their formerly free banking. The silent majority do not like it one bit. On the forum that I help moderate, we are starting to see more and more angry punters wondering out aloud why it is that they should pay more so that “feckless individuals” – their words, not mine – can take advantage of the system and “p*** my money up the wall” – again their words and not mine.

Now, those of us who have been around for a while know that free banking was always a myth. We know that the majority have always been subsidised in their free banking by the minority who paid through the nose every time they went over the agreed limit.

We know too that the minority involves substantially both a generational and a class divide – younger people temporarily on low earnings and poorer people who struggle to make ends meet.

My analogy of free banking is that it is like a supermarket where one set of shoppers pay £1.50 for a can of beans so that another set can have their 10oz sirloin steaks for a quid.

But try telling that to the person who claimed to me that he was in the pub recently and watched as someone bought a huge round of drinks out of the compensation proceeds obtained by reclaiming his overdraft charges. “I can barely afford a pint and there he was, blowing hundreds of quid on drinks for his mates,” was the comment made to me.

My guess is that in the coming months, remarks like this will become ever more common. Those, including myself, who have long argued that the way bank charges are currently structured is unfair and championed the right of those who were reclaiming them will face a tough argument in the face of such a backlash.

It is one thing to encourage the “painless” attack on the right of big banks to charge as much as they want and another to do so when the direct consequence of such an argument means the majority have to pay a lot more for their banking. As for summer surveys, sometimes I wish we hadn’t bothered.

Nic Cicutti is the editor of moneysupermarket.com. He can be contacted at nic.cicutti@moneysupermarket.com

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