Bank charges – Know your rights

Bank and Credit card charges have been heavily publicised in the media rover the past few years as people fight back against unfairly imposed and extremely high charges.

It is common practice for many banks to imposed a fine of £40 for unauthorised overdrafts, bounced cheques or failed direct debits, even when the shortfall figure in question is as little as £1. The bank’s reasoning – admin fees.

This spurred a wave of consumers filing numerous complaints and the case even being taken to the high court as normal people found themselves in a mountain of debt due to repetitively imposed charges.

The problem consumers face is the contract they enter into when opening a bank account or taking out a credit card. These contracts specify clearly the charges the provider will imposed if the consumer fails to ensure they have sufficient funds in their account or misses agreed prepayments.

The argument that has been fought in court is that legally the providers can only recover (through the courts if necessary) the actual cost the provider incurs through the consumer breaching the contract. Any figure above this is to be regarded as a penalty not a cost and is not legally recoverable. In response the providers claim that the charge is a fee for service rather than a penalty – if so then the fee for service must be reasonable as set out in the Supply of Goods and Services Acts 1982.

Excessive Charges

Review your charges to see if they can be regarded as excessive. Many people have found that they have gone into an unauthorized overdraft by a few pounds and been charged £40 by their bank. They have a limited time to bring their account back into credit and then have to find the extra £40 to pay their charge. If they have been unable to do this they receive another fine… then another, beginning a spiral of debt. If you have contacted your bank about the original fee and informed them you are unable to pay within the deadline then receiving repetitive fees is excess and unfair.

Like wise, if you are charged £50 for a letter informing you that you have exceeded your overdraft limit or £40 for a failed direct debit payment then you have a reasonable case for excessive charges.

Reclaim your money

Look into your account history and see when you have been charged, if it was reasonable or if it was excessive. If you have withdrawn all your cash for a night out just before a small monthly direct debit that you have had for a reasonable amount of time then you can’t not reasonably claim from the bank for charges. Be realistic and look at your account history – is that charge reasonable or excessively high?

If you need copies of your statements you can request this from your bank but they usually charge around £2 per statement. The other option is to pay a maximum of £10 and request a copy of the last 6 year’s charges on your account. Banks are legally required to send this when requested (and the fee paid) within 40 days under the Data Protection Act 1998. If an employee of your bank tells you that this list is not possible – they are mistaken and you should write to them stating that you are requesting a list of charges under the Data Protection Act 1998.

Contact Your Bank

Once you know what you have been charged – write to your bank and ask for your money back. You will likely get a no response but you should not back down. If you have not had a response after two weeks or a negative response, write to the bank again.

The banks will usually send out a set letter saying the charges are not unlawful and refusing to refund any money.

You need to be insistent and firm – you will not accept no as an answer, you will not accept a partial refund and you are willing to take your claim further. Here you have two options – take your claim to the small claims court if under £5000 (but incur fees that may be recoverable later) or contact the financial ombudsman.

In 2006 the Office of Fair Trading ruled that Bank charges of £35 were unfair but the supreme court ruled that bank charges could not be assessed for fairness. It is this ruling that has left consumers disappointed but adamant at fighting the bank against unfair charges.

Contact your local Citizen’s Advice Bureau with your specific details any they will be able to talk through your options with you, outlining the pros and cons before you take any action.

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