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Posted - 25 July 2007 : 10:56:24
How a £5 overdraft led to £500 charges
The letter was intended to frighten, like a mugger with a knife at your throat. No words were wasted. 'We demand immediate repayment of £509.90. This is the amount you owe the bank at this branch, including interest and charges...' etc etc.
The shock was deeply emotional, almost physical. Demand? Repayment? Repayment of what? The very word indicates the calling in of a loan. But there was no loan, no money to 'repay'.
So what was the provenance of this terrifying letter, no doubt spewed out by a computer to elderly widows and overwrought single mums with the same spiteful efficiency that it had just been spewed out to me and my colleagues in Shooting Star, our small investment club?
It came from HSBC. With astonishing mathematical dexterity, the friendly 'world's local bank' had managed to turn an accidentally incurred overdraft of a humble £5.60 into a debt almost 100 times greater - in just four months.
And then to threaten: 'Action may be taken against you through debt collectors or solicitors if you fail to comply with this demand. You may also be taken to court.'
So just how had this extraordinary situation come about?
Ten years ago, together with four colleagues, including Mail diarist Richard Kay, I decided after a jovial lunch to have some fun with stocks and shares and set up Shooting Star, an investment club.
We were, be assured, modest punters - and not very successful either. A current account to hold the money was set up at the Midland Bank - now the HSBC.
In recent times, for various reasons - one death, one retirement and so on - Shooting Star has been inactive. Last December, the grand total of £4.98 remained in our account.
Meanwhile, in March a £10.58 quarterly administration charge was taken by Barclays Stockbrokers.
The effect of this was instantly to create an unauthorised overdraft, which the bank calculated at £5.60. This seems to have attracted large and rising penalties, entirely without our knowledge.
According to the debt-collecting arm of the bank, by the end of April charges of £184 were being imposed; in May, another £152 and in June a further £176. Within four months, the debt of just over a fiver has risen to over £500, thanks to 'charges'.
No backstreet moneylender using hired muscle to maximise his profit could have fitted up a customer with more ruthless efficiency. And this, remember, is happening to hundreds, indeed possibly thousands, of ordinary people up and down the country, their mildest debts ratcheted up to dizzying and impossible-to-pay heights. No wonder from time to time we hear of - and in our business, we write about - people in such despair that they are driven to take their own lives.
How many of them, like we who formed Shooting Star, incurred the debt entirely innocently? And how innocent is the bank itself? These charges were imposed on an account that has issued only one cheque, believe it or not, in ten years - we still have the almost fresh cheque-book to prove it. And once in the red, 'charges began to stack up' - the bank's own words. Stack up? And how! But let us give the world's local bank the benefit of the doubt. Let us accept it was an accident, and not intended to squeeze as much as possible from a customer.
HSBC says it wrote, and no doubt it did. But instead of putting a real name on the letter sent to one of our addresses, it addressed it to 'Shooting Star'. No wonder it never reached us. Finally, a letter did get through. It was opened by Richard Kay at his home. He couldn't believe the contents.
HSBC has now apologised and even offered a donation of £250 to our favourite charity.
Fine for us. But this is a parable of our times, a deeply shocking example of bureaucratic power and greed, and why so many decent people find themselves staring into the abyss of despair and some of them feel the only thing they can do is jump.
• HSBC says that this was a business account and charges would be applied differently on a personal account. It further says that when the first letter to Shooting Star was returned, it should have made an additional effort to contact Richard Kay, and apologises for not doing so.
Source: thisismoney.co.uk
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