UK Banks make 40% of their income from penalty charges, should this be allowed?

Answer 1

That depends on what the penalties are for. If the penalties are for late fees, overdraft charges and the like, then it's really not the bank's fault that people aren't keeping track of their finances.

On the other hand, if the "penalties" are for things like making too many transactions in a month, going into the bank instead of using an automatic service, or other penalties which are clearly being used solely to extract more money from customers, then that's a problem that needs to be addressed by changing the banking laws or at least by changing banks.

So there's the way to make your determination. If the banks are really gouging people in order to make up this chunk of income, then it's something to get up in arms about. But if it's just that UK consumers are no more thoughtful, disciplined or organized than US consumers, then there's more work to be done in educating people about finance.