How Do Banks Justify Overcharging?

1. How Do Banks Justify Overcharging?

3. The banking sector is currently undertaking face-lifting activities after credible reports revealed that mainstream banks in Ireland have been overcharging their customers. Justifiable financial consultant and statements show that some banks have been overcharging for a long time, which is a clear indication that they have not been doing so unawares. Although the Minister for Finance, through the Central Bank, is enforcing a refund policy, below is a list of excuses that banks have been using to justify their infamous overcharging practices.

4. Policy Gaps For an extended period, operational managers have used the gaps in the law, which allow banks to charge customers for overspending, especially through overdrafts. Other legal openings allow banks to overcharge their customers in the cases of unsuccessful bank transactions such as reversed direct debit and bouncing of cheques among others. Although the law indicates that the charges must be the true cost incurred by the financial institutions, no legal provision puts a barrier to what extent the banks can charge.

5. Customers’ Ignorance According to bank officials, certain accounts attract higher fees than others. However, many bank account holders don’t understand the types of accounts they hold, which means they are always surprised when they get their bank statements. Some bank accounts, especially those that receive foreign currencies, attract higher fees due to the currency exchange charges. Customers might think that their accounts have been overcharged. However, they ought to know that they pay for the standard account maintenance and forex exchange charges.

6. Changing Monetary Value Future value of money is another “scapegoat” that most of the banks have been using to overcharge their customers. When customers deposit money in their bank accounts, they expect to withdraw money with the same value as they had deposited. Banks have to charge customers because money losses value with time and the banks act as a store of value. However, banks overcharging refund are not involved in the monetary policies, which mostly determine the time value of money.

7. High Risk in Lending Besides, the banks have been losing huge amounts of money after a considerable number of customers default their loans. In an attempt to mitigate the losses, most of the borrowers with low credit scores are constantly overcharged to cater to the provision of unpaid debts. The problem is that even borrowers with good credit scores are not spared. This is an unjustified financial institutions strategy as it forces genuine customers to cater to the financial consequences of negligent customers.

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