Bank Charges - Are They Lawful ?
For years, banks have been getting away with issuing punitive charges that are not reflective of their costs. This maybe unlawful and you can challenge these charges, demanding a full refund, plus interest.
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Banks have been charging whatever they like for bounced cheques, going overdrawn etc. However, it is considered by some unlawful for banks to fine customers in this way. Banks (or anyone else) should only apply charges that reflect their own costs.
As yet, the legality of this has not been proven in the high court. Taking this to court is the last thing the banks want. If the court were to rule against the bank, it would open the floodgates to refunds of billions of pounds and investigations into banking practices.
In April 2006, of the Office of Fair Trading raised this issue saying that Credit Card companies should apply charges of £12 maximum per violation, rather than the £30+ which was becoming the norm. Most credit card companies are now complying with this.
Challenging Bank Charges
If you have be subject to excessive bank changes, it is well worth complaining and asking for a full refund plus interest. By law, this is limited to the last 6 years. Please note:-
- You can only appeal against excessive punitive fines, rather than the standard charges for operating the account.
- This will not effect you credit score. Banks or any other lender only advise the credit reference agencies of non payment of credit repayments and of loan/credit applications.
Below is a guide to reclaiming excessive bank charges.
1: Open a new bank account.
Your bank may take exception to your claim and close your account, whether they payout or not. So, it's advisable to have a new bank account sorted in advance. This is so you can quickly re-arrange your standing orders, direct debits etc, and to where your wages are paid.
2 Add up all the bank charges made against you.
Make a list all the fines you’ve been subject to over the last 6 years. This should be for both active and closed accounts. If you have not kept all your bank statements over this period, write to the bank asking for details for all charges levied against you. You are entitle to do this under the 1988 Data Protection act, however the bank is entitled to demand an admin fee of £10 maximum
Sample letter requesting details of bank charges:
| A.N. Other Your Address |
|
Data Protection Officer Today's Date Dear Sir/Madam Re. Account number: [Your account number] Please consider this letter to be a formal request for a complete list of all the default charges for direct debits, unauthorised overdrafts, bounced cheques and standing orders paid from the above account over the last six years. Should you be unable to provide this information, I will accept a copy of my statements for this period. I am aware that statements on their own are not covered by the Data Protection Act 1998, however, I’m not requesting the statements, but the charge details, which I am entitled to do so by law. I have enclosed a cheque for the maximum statutory charge of £10. Yours faithfully |
Write to your bank demanding a full refund + interest.
If this were a court ruling, you'd be entitled to 8% interest per annum from the date your were deprived of the money. It is worth asking for this as you may get it. Also, it may encourage the bank to offer payment without the interest to quickly bring your appeal to a swift conclusion. Please be aware that they are not legally obliged to refund with interest as this is not a court order.
Sample letter requesting refund of bank charges (without interest).
| A.N. Other Your Address |
|
Customer Care Today's Date Dear Sir/Madam Re. Account number: [Your account number] Please consider this letter to be a formal request that you repay all default charges that have been applied to my account. I do not believe these charges reflect the true cost to yourselves of the account entering an unauthorised overdraft. The charges total are £[xxx]. I believe I have been unlawfully deprived of the money and therefore ask that you repay me the full amount. Please find a below a full list schedule of the charges. Yours faithfully |
You may say you will accept partial payment, in the hope that this will increase your chances of getting something rather than nothing.
Should your bank offer a partial settlement, then it's up to your whether you accept or not.
Threaten Court Action
Should you not get a reply, follow up the initial letter with:-
| A.N. Other Your Address |
|
Customer Care Today's Date Dear Sir/Madam Re. Account number: [Your account number] I refer to default charges applied to my account amounting to £ [xxx], which I requested a refund. I wrote to you on [date], requesting payment in settlement of my claim. As I have not heard from you (or have not received a satisfactory response) I am writing to inform you I intend to claim the above amount and court fees through the county court. This is based on the Unfair Terms in Consumer Contracts Regulations, as I believe these default charges are unfair and not reflective of your costs. I look forward for a full response to this letter within 7 days, otherwise I will commence court proceedings to reclaim my money. Yours faithfully |
Bank won't refund charges, What Next?
- Complain to the Financial Ombudsman Service. (FOS)
If the bank wont refund the excessive charges, or fails to resolve your original complaint within 8 weeks, you can take your complaint to the Financial Ombudsman Service. (FOS)
Get a FOS complaint form at financial-ombudsman.org.uk.
Explain your complaint and the actions you have taken so far stating your opinion that the charges do not represent costs incurred by the bank.
- Consider taking the case to the small claims court, providing your claim is for less than £5,000. This process will involve some costs.
See hmcourts-service.gov.uk for details for court procedures. - See consumeractiongroup.co.uk for further information on reclaiming excessive bank charges.
Of course, the best way to avoid bank charges is stay on top of your finances in the first place. If you have having problems staying in the black and are sick of paying bank charges, then please consider the benefits of a debt management programme or an IVA.
Can't find what you're looking for here ? Try:-Bankruptcy Alternatives
Debts over £15K ? An IVA maybe the solution for you. upto 70% of all Debts written off.
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This material is for general information and only constitutes advice in the broadest of terms. You should not rely on this information to make any decisions. Call our advisors on 0800 043 2444 for professional advice for your own particular situation.