|
To many of us know that horrible feeling. There, lying on the doormat is what looks suspiciously like a letter from the bank - and it's not offering you free cash.
The very fact that it's been posted through your letterbox at all, probably means you're about to find your bank account at least £25 lighter. And there's nothing worse than being hit when you're already down.
Slipping into the red - even for just a day and for just a few pence - is a very expensive business. In fact, according to Consumer Association magazine Which? it's a massive £4.7 billion business: that's the total overdraft charges that were slapped on current account holders in the past year.
But could the tide be turning against the all-powerful banks and their sky-high charges? And have some disgruntled bank customers really found a way to claw back some of the money they've paid in charges? Solicitor Mike Dailly, whose website bankcharges.info guides Scots customers along the legal path to challenging their bank, says it is as simple as gathering the information about how much you have paid in bank charges, first asking nicely for it back and then, if need be, raising an action in the small claims court.
"Personally, I've successfully sued my bank twice now - and I'm still a customer," he explains. "Once it was because I had paid for an album over the internet for just £7.99 which came out of my account one day before my salary went in. The bank refused to pay it and I ended with £67 worth of charges which I thought was incredibly unfair.
"I looked into it and found that, legally, the banks can only recover what they have actually lost as a result of what you have done wrong - they can't impose penalties or fines. So how could they justify charging, say, £39 for sending you a letter saying you are overdrawn when that letter has been spewed out by a computer at the cost to them of around 50p?"
The Glasgow-based solicitor threatened his bank with legal action which was finally settled out of court. The situation was repeated when he found his bank had imposed £160 worth of charges on an account which was supposed to have been closed down.
"Banks look at the costs of defending an action and decide that economically, they might as well just pay you what you want so you go away," he adds. "What is good about the small claims system is that you have minimal expense if you are suing for less than £750 - even if the case is awarded against you, the most you will have to pay out is £75."
But while a handful of customers throughout Britain have so far clawed back charges in this way, it's thought the floodgates are about to open, spurred on by a recent Office of Fair Trading finding on credit card charges.
The government body warned the financial industry that card default charges - often at least £20 - should "only reflect the administrative costs of dealing with the default" and suggested £12 would be a fairer. It followed that up with a stinging left hook aimed at banks who charge current account customers upwards of £25 for slipping into the red even for a day, with extra charges for payments while overdrawn. They too, it warned, need to be reviewed.
While the banking industry argues its charges are fair, legal and transparent, business is booming at internet websites offering advice on recouping bank charges.
Mike's site has helped at least 105 people claw back £37,000 in charges, while a further 800 have won £758,999 through the Consumer Action Group. Its spokesman Dave Smith stresses: "Bank charges are not legally enforceable. Penalty clauses in contracts in English and Scottish law for breach of contract aren't legal if the penalty exceeds the actual cost of the breach of either party.
"We all know that it does not cost a bank £25 to £39 to return a direct debit, standing order or cheque, and luckily so do judges and, indeed, the banks. It's purely a money-making scheme, and a lucrative one at that. But most assume that because it's a bank imposing them, then it must be legally entitled to do so."
Financial expert Martin Lewis of moneysavingexpert.com - where the bank charges discussion board has notched up almost 41,000 views and scores of "victories" since March - says we are now in the grip of a growing consumer revolution, with thousands of bank customers demanding up to six years' worth of refunds.
"The banks really are lying down and letting people do this. The vast majority of people are not going to court, the banks are settling before they get near a court," he reveals. "The real reason is that they don't want to go to court and reveal their cost structures - that would be a competitive disadvantage. So it is more cost effective for them to pay out.
"This comes down to being sensible, writing some letters, threatening to go to court and they will probably pay out. If you do have to go to court, there are organisations out there that can help you.
"No-one is suggesting that they go over their overdraft limit thinking they will just get the charges back - the best practice is not to incur charges in the first place."
As for the banks - the five largest of which last year posted profits of more than £30bn - the British Banking Association's director of retail Joanna Elson admits many do simply refund charges rather than opt to defend individual cases.
"Banks do look at each case individually, but often a commercial decision is taken that it's not worth the cost of fighting the case. There is always irritation when these campaigns start - but it is a free country and we live in a consumer culture. Ultimately, banks are big enough and ugly enough to cope with it."
Matt Pauley knows better than most how cruel the bank charges system can be - he has been slapped with a series of £60 fines, often for being just 3p overdrawn.
"I have a joint bank account with my flatmates which we use to pay the bills," the Heriot-Watt student explains. "Our parents contribute to the rent and we are relying on their money getting into our account before the rent comes out. There have been a few occasions when it's gone into the red. It's usually only for a couple of days at the most and for just a few pence, but we end up being hit with charges.
"The fees usually amount to around £60 - I suppose that's for posting the letter telling us what's happened and for either making or bouncing the payment."
Brewing student Matt, 22, of Polwarth Crescent, reckons the account has been hit by the £60 charges at least five times in the past year, sending the flatmates into further debt.
Here's what to do if you're sick of getting stung
SO how easy is it to claim back your bank charges?
? You can claim for charges going back six years. Unless you have kept all your bank statements, you will have to write to your bank asking for the information - which they must provide within 40 days.
? The bank may try to charge for full statements, so be sure to request only a print out of bank charges, which should not cost more than £10.
? It may be worthwhile to open a new bank account - some banks have frozen customers' accounts and threatened to close others.
? Write to your bank using a template letter from a specialist website - for example, www.which.net/campaigns/personalfinance/bankingcharges- telling them that you are a loyal customer and that you are unhappy with the charges you have paid. Allow the bank a reasonable amount of time to respond. They may agree to pay back all or some of your money - in 2004 Which? customer research found that two thirds of those who complained about unauthorised overdraft charges at this stage, received a full or partial refund.
? If that doesn't work, write to your bank and tell them that if they do not pay back your money, you will either take legal action against or refer them to the Finanical Ombudsman Service. The Ombudsman does not usually challenge charges that are applied in accordance with the banking contract.
? Consider threatening legal action. The small claims court in Scotland will only deal with claims up to £750. Lawyer Mike Dailly's website www.bankcharges.info offers information and legal templates for court claims.
? Fill in a Small Claims Summons form and pay court lodging dues of £7 for claims worth up to £50, and £39 for £50 to £750 (the maximum limit). The bank must reply to the court by the return date - usually six weeks after the summons is lodged.
? Remember, be prepared for the possibility that the case may end up in court and, of course, that you may not win.
The scotsman
|
