Cash Till Welfare – Excessive, Unfair Charges for Essential Banking Services – Santander reaches new Lows

An update on this post:  Santander refunded £110 of the £130 charges levied in June in respect of May.  They also have said they will no longer charge me the £10  non payment fee if I use my card when my account balance is not within the authorized limit.

The DWP withheld my benefits over Christmas into New Year because I declared £100 earnings from freelance work I had done.  You can read about it and the letter I sent in the posts from that time.

As a result my account went further into the red and I was charged hefty fees by Santander for transactions over my authorised limit. Although the DWP eventually paid the suspended benefits for the period, they refused to reimburse the charges I had incurred as a direct result.  When I moved from JSA into self-employment at the end of April, I had a similar problem.  I managed to find £475 worth of work during May but the invoice was not paid until mid June.  Since the extra tax credits that I was due were yet to be confirmed, during the month of May I incurred further charges by Santander.

I wrote to Santander to ask them if they could make an exception and waive the charges for May as I felt unable to move forward.  I explained the situation fully so they could understand it should not happen again.  They wrote to me asking  that I contact them by telephone.  They requested a further call, taking up to an hour to analyse my financial situation before they would consider a review.  Since I had explained all they could possibly need to know in the correspondence and it was looking like a terrible waste of time as well as money, I decided not to take that approach any further.

I contacted them via their Twitter account @Santanderuk this week and they asked that I email them and they will review my case.  First I thought it would be interesting to see exactly what my charges have come to since I lost my job at the end of last August.  The details are below: Cash till welfare

The first column shows the balance of -£997 as at 01 Sep 14.  I’ve stripped out all interest and penalty charges leaving net £734 income from all transactions except for those whose counterparty was Santander.

The ugly -£824 represents interest and penalty charges for unpaid direct debits, paid transactions when the account was below the authorized limit of -£1000 and higher rate of interest where that was exceeded. This leaves a balance of -£1093.  It was -£1125 before my working tax credits were unfortunately paid in and immediately swallowed up.  In a few days time the Child benefit of £190 for our three children for the month will be paid in and half of that will immediately disappear too.

Out of curiosity I calculated the equivalent APR that would incur £824 interest on my modest running balance from which I’d stripped out Santander’s charges. This assumed interest charged and compounded daily on the balance since 01 Sep-2014.  It required a rate of £112.5% to reproduce me the current balance.

This made me think there must be a fairer account structure that doesn’t penalise the poorest as almost anything looks superior to the current business model.  One that charges everyone alike for essential banking services. The current system, which hides the cost of banking and derives probably most of its profit from those who can’t afford to pay, is not going to help now that we have George Osborne doing his best to snuff out the self-employed as well as IDS/DWP casualties being washed up in the wake of welfare reform.

So here’s my suggestion Santander:

  • Charge a nominal fee per month for all current accounts (I’ve used £10 in my example)
  • Charge a fee for all direct debit transactions (I’ve used £1 in my example and I’ve doubled it up if it’s reversed and not paid)
  • Charge a reasonable amount of interest for all negative balances and charge it on a daily basis

The lower table showing a gain of £576 is the result of applying this cost structure.

Unfortunately, although I was initially hoping for a refund of £130, having looked more closely at what they’ve been up to, I don’t think it could reasonably be considered fair treatment of the customer unless they account is credited with £576. Otherwise, the onus is surely on Santander to explain how that’s not a far fairer way to do business than the current Cash Till Welfare model.

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