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New report lifts the lid on businesses bank overcharges
Added: (Tue Sep 13 2005)
Billions of £’s of historical bank overcharges remain unclaimed
New report lifts the lid on businesses bank overcharges
Anglia Business Associates (ABA), the company that brought the issue of overcharging by banks to prominence over 5 years ago, has just issued a new report; ‘Bank Overcharges….The Facts’. The majority of UK businesses that rely on loans and overdrafts have yet to identify and recover billions of pounds in historical overcharges, the report claims.
The Background
In 1998, Chancellor Gordon Brown appointed Don Cruickshank to lead the Government's Review of the UK Banking Sector. His report, ‘Competition in UK Banking: A Report to The Chancellor of the Exchequer’, was published in March 2000 and called for greater competition in the UK banking sector. In the same year, a debate in the House of Commons revealed that approximately 75% of all bank business customers have been overcharged at some time.
The debate was prompted by ABA’s involvement in random testing for BBC’s “Watchdog”, ITV’s “World in Action”, and Granada’s “Tonight with Trevor McDonald”. It was estimated at the time that £5 billion worth of overcharges was waiting to be reclaimed from British banks.
Report Highlights Ways Overcharging Occurs
According to the report, overcharging manifests itself in two ways:
1. Higher than necessary charges for businesses as a result of limited competition in the business banking sector; and
2. Charges levied in excess of those agreed, or levied in a manner which is deemed to be unreasonable or not transparent.
High Charges
Limited competition in the UK business banking sector has led to high profits and high prices - and most would agree that this has more impact on Small and Medium Enterprises (SME’s) than large corporations. Precisely to what extent businesses would benefit from further competition in the business banking sector is still a matter for some debate.
Overcharges
Interest rates have been relatively low in recent years and this has taken the spotlight away from the amounts charged by banks to their business borrowers. However, despite improved efficiency and transparency by the banks, there is significant evidence to suggest that charges may still be levied in excess of those agreed, or levied in a manner which is deemed to be unreasonable.
Over Two Out of Three Accounts Overcharged
The report goes on to say that over two out of three business accounts audited contained overcharges of some description and a significant number resulted in successful claims of over £10,000.
Human Errors Often Root Cause
Businesses are overcharged for many different reasons. However, the root causes are usually human errors made when interest and charges are applied to loan accounts and accounts with overdrafts. The major banks have continued to improve their systems and it’s a fact that computers do not make errors….but humans do!
No bank sets out to deliberately overcharge its customers. However, in any environment where there are high volumes and values of transactions with some level of human intervention, errors will occur. When a business has been established for a number of years it will probably have had historical banking arrangements which were not as robust and transparent as today’s. For example, less information was available on statements for customers to check their charges and verbal agreements could easily fail to be recorded accurately in bank records.
Based in Wymondham, Norfolk, ABA is the UK’s largest specialist auditor of bank charges. During the last five years it has recovered millions of pounds for thousands of customers.
ABA Director Les Bailey commented: “Whilst it is impossible to accurately determine the level of historical overcharging by banks, the fact is that overcharging is evident in a large number of businesses, particularly in SME’s (Small and Medium Enterprises employing less than 250 people) where there has been a reliance on overdrafts and loans over an extended period of time.
We estimate that less than 10% of businesses have ever undertaken a rigorous audit. Concern that a business’ relationship with the bank will be compromised appears to be the biggest barrier. However, we enjoy excellent working relationships with the major banks, so this fear is largely unfounded in our experience. The banks are always willing to refund any historical overcharging when it is evident.
To their credit, the major banks have adopted successive iterations of The Banking Code and charging structures are more transparent than they were in 2000 and earlier years. Furthermore, the specialist teams at bank head offices are very efficient at processing claims and we have seen examples of settlements being offered within a month.
What business owners need to understand is that the banks welcome the opportunity to rectify past errors. After all, they do not want their customers to take their accounts elsewhere – they want to keep them happy.”
A copy of the report is available from ABA by calling free on 0800 085 80 50
Ends.
13th September, 2005
For more information contact:
Les Bailey
Anglia Business Associates
4 Penfold Drive
Gateway 11 Business Park
Wymondham
Norfolk
NR18 0WZ
Tel. 0870 899 8820
Mobile. 07979 535532
Email: les.bailey@meridianmail.co.uk