PPI compensation claims could spell the end of free banking
by Luke Whitmore, 16th May 2011
Experts have warned that the banks' surrender in the PPI
mis-selling court case could lead to the end of free current
accounts, as financial institutions look to make up their losses
elsewhere.
In addition to cost increases in such areas as loans and
mortgages and lower interest rates on savings, some have suggested
that charging for account services which are currently free could
well be the next step for UK banking in the wake of the mis-sold
PPI (Payment Protection Insurance) scandal.
Back in 2009, when the banks became embroiled in a Supreme Court
case regarding excessive overdraft penalties, there were
suggestions that a loss could result in the introduction of bank
charges for current account activities such as direct debit
payments or sending out bank cards.
The banks saw an unexpected victory in the 2009 case, and the
idea was put aside, but with banks now facing payouts of up to
£3.2bn each in compensation for mis-sold PPI, rumours are
circulating that the proposals to charge for current account usage
have again come to the fore.
"If you squeeze banks' profitability in one area it will simply
pop back up in another," commented Kevin Mountford, a financial
expert at moneysupermarket.com, explaining what he calls the
'waterbed effect'. "Take billions of pounds from the banks as a
consequence of PPI and they will look to recover some or all of
that cash elsewhere."
Other options suggested by financial experts include the
possibility of banks strongly encouraging customers to make use of
account types which already use fees, as well as limiting loans and
credit cards to their pre-existing customer base. There have also
been suggestions that those who do not pay in a certain amount of
money each month will be forced to pay for their accounts, with the
services remaining free for already-profitable customers.
If you have been a victim of mis-sold PPI, we can help you claim PPI
compensation today.
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