Financial Penalties For Non Direct Debit Payments - Are They Legal?
At the moment it seems as though the UK financial sector is lurching from one disaster to another, with thousands of claims being filed for the return of historical charges, mortgage fees under pressure as well as allegations of mis-selling by a major high street banking establishment. But is there more bad news around the corner?
The issue of penalty charges for example, going overdrawn, are based around how much it actually costs the service / product provider to take the necessary action. It has been proved that while overdraft penalties cost the banks no more than £4 each to process, they have been charging consumers in excess of £30. Many are now starting to see a similar scenario with regards to regular payments by direct debit, cheque, bank transfer, etc.
Car Insurance is an area of finance where the consumer is penalised for not paying by direct debt, with other forms of payment such as cheque and bank transfer popular. It has been estimated that the consumer may be paying in excess of 20% extra a year, just because they are not paying their premiums by direct debit. On an average policy of approximately £800 a year, this can translate to a penalty for your method of payment of more that £170!
Is this a service charge, or is this a penalty? Does it really cost upwards of twenty percent more a year to collect premiums by alternative methods to direct debit? The consumer is looking for more ways to cut financial charges, as we have just seen the banking sector report record profits at the expense of their customers - what next?
It would not be a major surprise to see a member of the public challenge the excessive penalties for non direct debit payments, but how would the financial services industry respond? Billions of pounds would be at stake, offering great encouragement for the consumer to fight back.
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