Let the inept subsidise me
I’m a great fan of governments and companies making their money from voluntary, rather than compulsory, charges. The lottery is an excellent example. Another, outside of the government sphere, is personal banking. There are generally no charges for holding a UK current account or credit card, and you can usually get the kind of quality deal that means the bank is paying you for your custom (the fact that it’s free almost makes up for the fact that the industry has no concept of customer service).
But where do the banks make their money, then? Simple: they publish a simple set of rules that people who have accounts with them should stick to, and then they apply penalty charges to people who fail to stick to the rules. For example, they say “if you have a credit card, then you should make at least the minimum payment every month – if you don’t, then you’ll be charged a £25 penalty”. People who don’t like wasting money can sign direct debit forms to ensure they never have to pay the penalty; people who do like wasting money can pay the penalty. All voluntary. Nice.
The Office of Fair Trading disagrees. It thinks that it’s unfair to expect people to follow simple rules, and therefore that financial services providers shouldn’t be allowed to charge penalties greater than the actual cost of sorting out people’s problems. It effectively changes the customer/institution relationship from one based on rules to one based on charity – applied outside of the financial services industry, it would suggest that people who miss budget airline flights ought to be allowed on the next plane for free (as long as there’s a seat, and subject to a tenner’s admin fee).
As a consumer, this doesn’t seem like such a terrible prospect. However, nobody is seriously proposing that it should be applied universally – rather, the OFT seems to making banks a special and separate case from other contractual business relationships. Which is a bit odd.