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Reclaiming on excess bank charges

Introduction

In the past couple of years, an enormous amount of media attention has been devoted to the subject of unauthorised overdraft charges.

For many years now, banks have traditionally levied large penalties on customers who go over their agreed overdraft limits.

What generally had not been appreciated by financial watchdogs who are supposed to prevent consumers from being ripped off was the extent to which some bank customers can find themselves facing penalties for many hundreds of pounds – sometimes for being overdrawn by just a few pounds.

How can this happen?

• A typical method of levying charges will usually start with a letter from a bank telling the customer that he or she is overdrawn. The cost of this is about £35

• Then, if the bank is required to make an additional payment, for example a direct debit or a standing order, it may levy further fee of up to £30, regardless of whether that payment is approved or rejected

• In addition, some banks will add a daily fee of about £8 each time that a further withdrawal is made from the same account, making it further overdrawn

• Finally, some banks will carry over their charges to a new month if the unauthorised overdraft has not been resolved. Given that many people go overdrawn at the end of the month, while they are waiting for their wages to be credited to their account, this can happen quite often

Until now, the banks have long claimed that all these charges reflect the “true” cost of monitoring the account of someone who is overdrawn and ensuring that they do not go even further into debt.

But leaked internal evidence from disgruntled current and former bank employees suggests the real cost is between £2 and £2.50.

Why the real cost matters

The importance of this fact is as follows. Under the Unfair Terms in Consumer Contracts Regulations 1999:

• Bank charges for going overdrawn or for bounced cheques are the equivalent of a charge for breach of contract, known as “liquidated damages”, and the courts can enforce payment

• However, the sum must reflect actual costs incurred and not exceed the damage the bank suffered due to the breach of contract. Otherwise it becomes a penalty, which is unenforceable by the courts

Therefore, if you believe you have been unfairly penalized by your bank, you are entitled to the money back.

It is this argument over the legal nature of bank charges which has led many hundreds of thousands of people to reclaim them.

So if you are among those who want to claim money back, how do you go about it?

Claiming your charges back

Here are some simple steps:

1. You are entitled to reclaim up to six years’ worth of charges. So dig out your statements or write to your bank asking them to furnish you with the past six years’ statements. Your bank must provide this information within 40 days, according to the Data Protection Act 1998.

Some banks may try to charge you a reprint fee. To avoid this, ask for a computer printout of charges, which are acceptable evidence in a small claims court, and they cannot charge you more than £10.

Write to your bank saying that as a loyal customer you are dissatisfied with the way they have charged you and ask for your money back. Note that you may be able to claim back interest in respect of the charges – but only if you win a court case on the issue. But it still doesn’t hurt to ask for it as a negotiating ploy.

2. If your bank ignores your letter, refuses to pay or only makes a partial offer, you are entitled to go to court. But write a stroppier letter first to see if you can get them to make you an offer or improve the one they have made.

3. If the bank still won’t move, you may have to take them to court. There are two options: one is to go to the local County Court in person. The other, far simpler way is through the courts system's Money Claims online service. It is available here. This allows people to make claims from the comfort of their computer, save details as they go along and pay fees of between £30 and £120 online. Here are details of how to make an online claim, taken from the Bank Charges Hell website: http://www.bankchargeshell.co.uk/bank_charges_claim_online.pdf

4. At this point, either the bank makes an acceptable offer or you face a court hearing. To date, every case has been settled out of court, although that may change soon. If the bank ignores your claim, you will win by default after 14 days. In an attempt to bluff, the bank may choose to acknowledge the claim, giving it another fortnight to enter a defence. If this deadline passes without any further action by the bank, you win by default and can demand your money back.

If the bank decides to ratchet things up a step further it may enter a defence, which is often done at the last minute.

5. If it does you will receive a “court allocation questionnaire”. Fill it in and send it back to the court within a week – sending a copy to the bank as well to show them that you, too, mean business. The pressure groups say this is the point where the bank will finally back down by not turning up for the court hearing, thus allowing the claimant to win by default.

6. If things have got this far, which has been known to happen, if very rarely, you should visit the Bank Charges Hell website, where a forum carries further useful information: http://www.consumeractiongroup.co.uk/forum/.

And finally...

Although you are perfectly entitled to claim unlawful charges levied against you as many times as you wish, you should also be asking yourself how it is that you are managing to breach repeated agreements with your bank over your overdraft limit.

There may be issues there about how you manage your money more effectively and even, potentially, to do with dealing with debt.

Sometimes, though it may be painful to admit the fact, it is not only the bank that is at fault.

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