Making money from bank customers, US style

David Boyle nef fellow

Could "high-to-low" debit transaction processing already be common practice in the UK?

The American Banker may not be everyday reading on this side of the Atlantic, but they have an explosive expose on their website about the way one bank Californiabased Union Bank may have dealt with their customers. It makes disturbing reading.

The practice is now the subject of a series of court cases, and Union are not the only bank involved in this practice, using software supplied by a management consultancy called CAST. The system rearranges the order in which a customers spending gets presented to the bank not chronological, but biggest payments first. The idea is that, if the bank changes the order so that the big spending transactions go first, it should increase the amount of times customers go over their limit and therefore increases the punitive fees that go to the bank. Some of these fees then get shared with CAST, the case alleges. There are now 30 cases pending about this in the USA, which means a wealth of email data has emerged, which is where American Banker got their story. The practice seems to have gone ahead despite protests from bank staff who said it was unfair to poorer customers. It also becomes clear, reading the emails, that the policy was deliberately kept secret from customers too. "By design, the details of what happens inside the bank when an overdraft occurs were never intended to be communicated to the public," a Union Bank employee wrote to a colleague in an email. Other banks were involved in the USA in this particular method of increasing charges to customers. The question is this. CAST must have offered similar software to the UK banks. Are any of them using it now? I think we should be told.