Banking on justice
A people's revolt has begun against disproportionate penalty bank charges. The Consumer Action Group explains how to fight your case
Nearly three million people have so far joined the battle against fees imposed for unauthorised overdrafts and returned direct debits. The fees are meant to cover administration costs, estimated at about £4.50 rather than the £35 some banks charge. The law currently allows claims to be made for the previous six years.
The Office of Fair Trading is investigating the legality of bank charges and is due to report at the end of the year. Many success
stories have emerged so far.
Financial expert Martin Lewis of moneysavingexpert.com says: "The law is plain: any charges banks levy on their customers must be proportional to the actual costs they
incur. The simple question is: does it really cost £35 to send an automated letter when someone has gone 1p over the limit?"
The Consumer Action Group (CAG) an internet-based advice group, leads the fight.
Here are its tips on reclaiming "unfair" charges on your account:
1. List of charges
You need to know all the fines you've been charged over the past six years. The chances are that you will not have this to hand, but you may be able to search through your online statements to gather information. You have a legal right to ask the bank for this information under the Data Protection Act.
The bank has 40 days to comply with your
request. If it takes longer you can complain to the Information Commissioners Office (www.ico.gov.uk). Banks are allowed to charge £10 for this service, so include your cheque with your letter and send it to the bank's registered office.
You can download a template letter from www.consumeractiongroup.co.uk and use the site's spreadsheet to help collate charges.
You can claim back fines for:
l returned direct debits
l card-misuse fees
l unpaid standing orders
l unpaid item fees
l exceeding your overdraft
l referral fees
l overdraft interest
You cannot claim for:
l ATM (cash machine) usage fees
l an agreed overdraft fee
l account service fees
2. Ask for your money back
Write to the bank, detailing all the fines, and ask for your money back as you believe the charges to be disproportionate. Set a deadline of 14 days for the bank to respond.
The most likely outcome is that the bank will ignore or refuse your request or perhaps tell you it is prepared to fight your claim. It may also make a partial offer, but banks rarely pay out immediately.
If it does not reply with a full offer, does not reply at all, or replies saying it is investigating and will contact you in four weeks, still move to the next step after your 14 day deadline.
You can download the template of this second letter from www.consumeractiongroup.co.uk.
3. Threaten court action
This is a similar step to the one above, but lets the bank know that you are serious about reclaiming your penalty charges. Another letter needs to be sent - again, set a strict deadline of 14 days for a response. Remember to include the spreadsheet detailing your charges. The outcomes will be similar to those after your first letter. As an option for speedy settlement you could accept an offer or even offer a settlement figure if you wish.
Download the third template letter at www.consumeractiongroup.co.uk.
4. Making a court claim
If you have still received no response, it is time to go to court. This is the scary part, but so far the banks have not contested court claims in most cases.
The Small Claims Court hears cases under £5,000. In the vast majority of cases, small-claims court costs are not awarded against the loser, so this is less risky. You can make a court claim online at www.moneyclaim.gov.uk or fill in paperwork from your county court. There is a fee of between £30 and £120 to pay, depending on the size of the claim; this is refundable if you win.
5. Court Process
Once your claim is issued it will be served on the bank within four days. The bank (defendant) then has 14 days in which to acknowledge your claim. This just involves the bank returning a form to the court acknowledging receipt and expressing its intent to defend. Once the defendant has acknowledged a claim, the time limit extends to 28 days from service of the claim, for it to enter a defence at the court.
You will be sent a copy of the defence by the court, and probably a copy from your bank's solicitors/legal department.
6. Outcomes
The bank could settle in full as a gesture of "goodwill", but will not admit liability or any wrong-doing. This has been the most common outcome so far. If the bank does not acknowledge the claim after 14 days, you can request a judgement by default, which can be done online (www.moneyclaim.gov.uk).
The bank could acknowledge the claim, but fail to enter a defence - in which case, you can again apply for a judgement by default, but this will be after 28 days. The banks have rarely defended claims; where they have done this, their action mainly relates to claims which have been made beyond the six-year period or because the banks have disputed the amount claimed.
If you win through the courts you can add 8% interest on top from the date of each charge. You could ask for this in the initial claim, but you are only legally entitled to it through a court claim.
Further resources and template letters
www.consumeractiongroup.co.uk
www.moneysavingexpert.com/bankcharges
www.penaltycharges.co.uk
Case study - the Duke of York, Crediton, Devon
Tracey Bond, owner of the Duke of York
The Devon licensee successfully reclaimed almost £8,000 in penalty bank charges from NatWest.
Bond claimed the process took "minutes" to get underway after downloading the template letters.
"It took less than two months to reclaim charges dating back five-and-a-half years," she said. "I am absolutely delighted, as this trade is hard enough without excessive unfair charges. My business has always been a good one, but I did go through a sticky patch when I split up from my husband. At times I was being charged £500 a week. The bank didn't seem to care if I was over my limit - it just carried on charging me fees."
Bond became concerned when the bank stated it would defend her claim. However, she then received a package from NatWest. "The last paragraph said that as a gesture
of goodwill and without admission of liability or error it was prepared to offer the amount of £7,930, paid direct to my account.
I am so happy."
Case study - the Jug & Glass, Edwinstowe, Notts
Andy Scattergood, Punch lessee of the Jug & Glass
Scattergood claimed back £4,110 in penalty charges from NatWest. He is now in the process of claiming back about £5,000 from Yorkshire Bank.
Scattergood said: "It took me less than three months to get my money back and I would urge others to look into it seriously.
"It is easy to go overdrawn while running a pub. I ran up some charges about two years ago and they just escalated.
"I was charged for a cheque bouncing and being overdrawn, as well as a referral fee - so I was charged three times for one offence.
"It is not fair. The bank did not admit liability, but it paid me as a gesture of goodwill."
Scattergood is also attempting to claim back penalty charges from his personal account with Yorkshire Bank. "Yorkshire has refused to pay, but I am going to use the money from my other claim to take it to the County Court."
