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Thread: The Unused Facility Fee - from Standard Bank

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    Site Caretaker Dave A's Avatar
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    The Unused Facility Fee - from Standard Bank

    I'm sure most of us see nothing unusual in being charged interest on money we borrow from the bank. But what is the view here on interest being charged on the money that you don't borrow?

    This email received from my business banking manager at Standard Bank introducing the Unused Facility Fee (UFF) certainly has me pondering the concept.



    Dear Valued Customer

    A new fee is going to be implemented by the Bank as from 1 July 2014

    The unutilised overdraft fee is going to be levied on business accounts that have a history of not utilizing it facilities to capacity.

    This will also assist the owner to manage the business cash flows.


    What is UFF?
    • UFF is a fee charged by a lender to a borrower for an unused or underutilised credit line.
    • An Unutilized Facility Fee is generally specified as a fixed percentage of the undisbursed loan amount.
    • The lender charges an Unutilized Facility Fee as compensation for keeping a line of credit opened


    Reasons for the Unutilized Facility Fee introduction:
    • Access to an overdraft facility is provided up to an agreed limit
    • As a bank, we are obliged to hold capital against the entire overdraft facility, regardless of whether it is used or not
    • Under the new international regulatory framework of Basel III, all banks are now required to raise their regulatory capital base to improve the banking sector’s ability to absorb financial and economic stresses in order to protect all depositors
    • Unlike competitors, Standard Bank have not previously charged a fee, however the new regulatory environment has now necessitated the introduction of this fee


    How is UFF Calculated?
    • Fee charged on the unutilised portion of a customer’s overdraft facility
    • Calculated on the daily outstanding balance of the facility
    • Recovered monthly
    • Fee will fluctuate depending on the utilization of the overdraft over the month
    • The fee will be charged at 1.2% of the unutilized portion of the Overdraft in any given day


    Fee to be applicable to accounts based on following rule:

    If utilisation is less than the maximum stipulated utilisation rate (i.e. 80%), then Charge applicable fee, else
    If utilisation is greater or equal to the maximum stipulated utilisation rate (i.e. 80%) then fee = 0%.

    Normal interest on overdraft will be levied.




    Thoughts, anyone?
    The trouble with opportunity is it normally comes dressed up as work.

  2. #2
    Platinum Member Marq's Avatar
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    So wrong on all levels.
    I am sure one could invoke the CPA.

    Reminds me of the Hotel Bill joke. Its time we started invoicing the banks for
    for wasted time and paper dealing with their incompetence. This thing where they
    just dip into our accounts for whatever charges they feel like for the month
    is so wrong as well. They are entrusted with our life savings and should show more
    respect rather than steal from us under the colour of the law that they have laid
    out themselves.

    For those who don't know the Hotel Bill joke.... here is one of its many forms:-

    A husband and wife are travelling by car from Johannesburg to Cape Town.
    After many hours on the road, they're too tired to continue,
    and they decide to stop for a rest. They stop at a nice hotel and
    take a room, but they only plan to sleep for four hours and then get back
    on the road. When they check out four hours later, the desk clerk hands
    them a bill for R 3,500. The man explodes and demands to know why the charge
    is so high.
    He tells the clerk although it's a nice hotel, the rooms
    certainly aren't worth
    R3,500. When the clerk tells him R3500 is the standard rate, the man insists
    on speaking to the Manager. The Manager appears, listens to the man,
    and then explains that the hotel has an Olympic- sized pool and a huge
    conference centre that were available for the husband and wife to use.
    "But we didn't use them", the man complains.
    "Well, they are here, and you could have," explains the Manager.
    He goes on to explain they could have taken in one of the shows for
    which the hotel is famous. "The best entertainers in the world perform
    here," the Manager says.
    "But we didn't go to
    any of those shows," complains the man again.
    "Well, we have them, and you
    could have", the Manager replies.
    The Manager is unmoved, and eventually the man gives up
    and agrees to pay. He writes a cheque and gives it to the Manager.
    The Manager is surprised when he looks at the check. "But sir," he says, "this
    cheque is only made out for R1000."
    "That's right," says the man. "I charged you R2500 for sleeping with
    my wife."
    "But I didn't!" exclaims the Manager.

    "Well," the man replies, "she was here, and you could have!
    The cost of living hasn't affected its popularity.
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  3. Thank given for this post:

    adrianh (05-Jun-14), BusFact (06-Jun-14), Vanash Naick (09-Jun-14)

  4. #3
    Platinum Member Marq's Avatar
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    Remove the Reserve Bank for Starters
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    The cost of living hasn't affected its popularity.
    Sponsored By: http://www.honeycombhouse.com

  5. #4
    Platinum Member Marq's Avatar
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    Realise the problem!
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    The cost of living hasn't affected its popularity.
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  6. #5
    Platinum Member Marq's Avatar
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    And then stop borrowing form the Banks.
    Its the only way to solve these kinds of issues.
    The cost of living hasn't affected its popularity.
    Sponsored By: http://www.honeycombhouse.com

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    Diamond Member adrianh's Avatar
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    I honestly think that we should think of ways to get around the banking system. They simply make up new rules as they go along and we just have to pay whether we like it or not.
    How easily someone is offended is directly proportional to how stupid they are.
    ~GS Elevator

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    Platinum Member desA's Avatar
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    SA banks have no shame.
    In search of South African Technology Nuggets(R), for sale & trading in South East Asia.

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    Silver Member Greig Whitton's Avatar
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    Quote Originally Posted by adrianh View Post
    I honestly think that we should think of ways to get around the banking system.
    You're not alone. Peer-to-peer lending may be the future.

    Founder of Evergrow - Helping South African business owners grow their business without the growing pains

  10. #9
    Site Caretaker Dave A's Avatar
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    So I went hunting the net to see what popped up. The only serious comment I've found published so far was this - Banks, small businesses and paying for what you donít use by Graeme Codrington. It seems he took the trouble to follow up on the sms sent out at the end of last month. Personally I found it too short on detail to serve as anything remotely like official notification, and was far too busy dealing with the month end joys of being an entrepreneur.

    It seems as well I didn't bother, as this snippet reveals:

    On Tuesday, as business people around South Africa had to deal with the news that the economy had contracted by 0.6% in the first quarter of this year, those that have business banking facilities with Standard Bank also received an sms informing them that the bank would now be charging ďa fee of 1.2% on all unutilised overdraft facilitiesĒ. No further information was given, except to phone the business banking call centre if one had queries.

    Those customers who did phone encountered bemused and clueless call centre operators who took a few minutes even to confirm the information with their supervisors. Apparently, no-one in the business banking decision making department had thought to tell anyone else in the business banking division about this interesting new approach to charging customers for services they did not need to use.
    And it's not like Standard Bank didn't have time to plan for this announcement - my business bank manager gave me a heads up that this was on the horizon in November last year.

    All of which makes the email's lack of clarity on some pretty key specifics even more tragic.

    Like that 1.2% - is that per day, per month, or per annum?
    Like that 80% threshold you need to get over (or is that under?) - do you get hit with this UFF every day you don't make the 80%, or do you just have to hit the target every month and you're only hit for the months you don't, or what?

    And finally, given all that time for careful consideration, to still push out a line like this:
    Unlike competitors, Standard Bank have not previously charged a fee, however the new regulatory environment has now necessitated the introduction of this fee
    Did they seriously think no-one would check if this was true?
    The trouble with opportunity is it normally comes dressed up as work.

  11. #10
    Platinum Member Mike C's Avatar
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    Did they seriously think no-one would check if this was true?
    Yeah - I think that ABSA has had this for some time now. They call it a "Commitment Fee".
    An education isn't how much you have committed to memory, or even how much you know. It's being able to differentiate between what you do know and what you don't. - Anatole France

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