Lets face it, to the outsider a bank is a large complex financial machine, powerful in the extreme, justifying its every action from the microscopic print of some contract you signed years ago and probably dont even have a copy of anymore. Your only human contact is the people in the branches and the call centres who don’t have the authority to change things for the better, the big players and decision makers are all tucked away inside boards rooms and ivory towers, occasionally giving a short interview to the media but never willing to speak directly to YOU, and given the amount of financial clout these institutions can exercise in the court rooms they can seem like an modern day Goliath to your puny David, a force to be truly reckoned with.
Or so it would seem…
There is a growing movement called Consumer Revenge in the UK which is fighting back against the unfair practices of these and other institutions and the most successful campaign to date is the reclaimation of unfair bank charges imposed by all the high street banks for unauthorised overdrafts, return direct debits, bounced checks and the like. As a person who has successfully challenged HSBC for unfair charges I am going to talk to you about my experiences and explain how to make your own claim.
Of course the best way to avoid bank charges is to not go overdrawn in the first place, however this is not always possible in these days of rising interest rates, the credit culture, and the general cost of living in what many people now refer to as “Rip Off Britain”, and I am sure the majority of people reading this will have been on the receiving end of unfair charges, and with the average settlement being just under 1000 pounds it is well worth you reading on.
The platform for this is The Banking Code which is a set of industry standards that all high street banks are obliged to follow and it states quite clearly that banks are allowed to charge a fee for services such as arranging unauthorised overdrafts and returning direct debits but this fee has to be proportional to THE COST INCURRED BY THE BANK FOR DOING SO, further more THIS FEE SHOULD NOT BE USED AS A PENALTY. When you consider the cost to a bank of arranging an unauthorised overdraft is in the region of 2 to 3 pounds, yet they will hit you with a charge of 25 to 40 pounds for doing so you can see they are clearly in the wrong. The banks response to this is that the charges are detailed in the agreement the customer signs when opening an account and they are only acting according to their contract, however up to now banks have preferred to settle these claims out of court for two reasons. Firstly for the banks to lose a test case over these fees would set a legal precendent and open the doors for everyone to claim, and secondly a court case would require a bank to reveal its internal financial workings which would then become a matter of public record at the end of the case. This is something a bank wants to avoid because if its competitors get hold of this information it puts them at a severe commercial disadvantage.
I should point out here that at the time of writing the Office of Fair Trading (OFT) has begun a test case against a number of high street banks to settle this dispute and all new claims have been suspended pending the result of the case in about 12 months time. However, new claims still have to be logged and is it well worth submitting a claim now rather than later.
So what do you need to do?
First thing is to work out how much they owe you, ring up your bank and tell them you want copies of your statements for the last 6 years. They have to do this as a free service and if they do try and charge you, refer it to the financial ombudsman (google it for a phone number). You can only claim for 6 years because the law states any debts that lie outstanding for more than 6 years with no attempt to recover or aknowledgement from the other party become null and void.
When your statements arrive you need to go through them with a highlighter pen and mark off all the fees you have been charged for unauthorised overdrafts, bounced checks, returned direct debits and add them all up. Then you are allowed to add on interest at the standard 8% from the date of the first charge however you can only add simple interest as opposed to compound interest.
Next you need to write a letter to your banks customer service department stating that you believe they have not been acting in accordance with the banking code, and that if you do not get your money back you will start a claim in the small claims court, and tell them they have 28 days to respond. Include in the letter a list of all the amounts you have been charged and the dates and how much you want to reclaim including interest. If you look on the web there are many sites offering template letters for this purpose, simply download one and fill in your own details. It couldn’t be simpler.
In the early days of these claims there were a few people refused who started claims in the small claims court. This was because at first the banks were trying to test peoples resolve and when they found people were willing to lodge claims they started settling straight away. Now this issue has gone to test case it is unlikely you will need to go down this road as the result of the test will basically decide whether you get paid or not. It is however a fairly simple procedure and can be done online. All you do is pay 200 pounds to lodge your complaint and the other party has 60 days to respond. If they fail to respond in that time then you automatically win, if they do respond they can either take it to a hearing (which they dont want to do) or settle the full amount within a further 60 days. Either way, your 200 pounds gets refunded to you as costs.
When I made my claim, I got a reply in 28 days that basically said “we do not recognise the validity of this claim however for purely commecial reasons we will settle it”. I was also asked to sign a form stating that “we are repaying these fees on the condition that we do not accept liability for them”, which was fine with me as long as they are paying them back. I expect that people claiming now will get a letter telling them about the OFT test case and the suspension of claims but remember they still need to respond to your original complaint within 28 days. This is another part of the banking code and if they fail to do so report them to the financial ombudsman, the best way to make sure they respond is spend an extra pound and send your letter recorded.
The final piece of advice I have is to set up another bank account since some of the banks have been getting snotty about these claims and saying “we will pay them out but because you are breaching your original agreement we are going to close your account”. If you have another account ready and waiting with a suitable overdraft facility set up (if necessary) them this is no problem.
As I said earlier, it is well worth lodging this complaint now, apart from anything the volume of complaints lodged is a measure of public opinion and this may well have a bearing on what happens in the future.
Get the ball rolling today and who knows, a year from now you might get a nice surprise in the post.