Anyone who’s ever gone overdrawn will be eagerly awaiting the result of the test case which will decide whether the charges that banks levy on their customers are fair or unfair. The issue that’s making the news is to decide if the bank is making a charge that genuinely reflects how much it costs them (unlikely – surely only a small admin charge would be required), or if they’re making a charge to punish someone for going overdrawn. This distinction is important because the banks are not allowed to make punitive charges, only the government is legally able to do that.
I had one objection to this test case. If it goes ahead and banks aren’t able to make such charges anymore, then the banks will lose out and they’ll try to make their money elsewhere. This would mean the end for free banking as we know it, and banks might have to start charging us to keep our money, or alternatively raise interest rates on loans. This would be bad.
But then I looked at it another way. The people who are having to pay these bank charges at the moment are the people whose bank balances are closest to zero; in other words, the poorest. Now I can’t support a system which not only punishes people financially for being poor, but also depends on that money to finance the richer people in society who rarely have to pay charges for going overdrawn. It would be better that we all just paid a flat rate, or even better that banks charged more for accounts with more money in them.
The consequences of this test case could reach far and wide.