Reclaiming unfair UK bank charges
Today, a High Court judge ruled that bank charges ‘can be unfair under UK law’. This has come about because over the last couple of years lots of us have been demanding that banks refunded our bank charges. You know the kind of thing, £30 for an unauthorised overdraft, another £30 for the letter TELLING you you have an unauthorised overdraft.
People were getting increasingly fed up with these brutal charges. Last year, customers started to reclaim millions of pounds of charges through the courts. Ad hoc basis, some courts ruling one way, some another. So OFT, 7 High St banks and a Building Soc sought clarification through High court. And while that case has continued, further refunds have been put on ice.
The way people were getting their money back was by claiming that the charges were unfair or ‘penal’. The banks argued in court that the charges weren’t penal (ie penalties) but were just fees.
Now the Judge, Mr Andrew Smith has actually agreed with the banks up to a point. He said that these charges are not, by definition unfair – so banks ARE allowed to levy charges. BUT THE INTERESTING BIT FOR BANK CUSTOMERS is that his ruling DOES shatter banks’ argument that the charges were exempt under a 1999 law, called the Unfair Terms in Consumer Contracts Regulations (UTCCR). tHE OFFICE OF FAIR TRADING (THE OFT) won ruling in High Court that BANK charges come under ‘unfair contract’ rules, designed to protect customers.
HOW MUCH ARE WE TALKING ABOUT?!
OD charges worth 3.5bn a year to banks. £500m already paid back, but on hold while the test case proceeded. STILL on hold as just preliminary ruling. HSBC has said the ruling could cost £303m, but I’ve read other analysts predicting £1.1bn.
What next?
The next hearing is 22 may 2008, and next stage is for the Courts to decide a fair amount for charges … if you’ve written to your bank and are awaiting an answer, it’s still on hold to then.
REMEMBER!!!
This is about reclaiming bank charges, NOT credit card or any other fees.
WHAT TO DO?
In short, you HAVE to claim on an individual basis … ie write a letter. Even though NOTHING will be actioned by the banks till 22 May, you still want to get a dated letter off to your bank if you think you do have a claim, because claims only go back six years in England and Wales and, I’m sorry to say, only five years in Scotland!
It’s not all good. Many customers whose accounts stay in credit would argue that that they’re being rewarded for prudence. If there is no charge for going overdrawn (customers might call it a penalty but the bankers would just call it a fee) then there’s no reward for running your account well. The banks would also argue that SOMEONE has to pay … though that’s a tough one to swallow if you’ve just been charged £30 for being £5 overdrawn for 3 days.
SO DOES IT SPELL THE END for free banking? There is an argument that the banks are so competitive for cash just now that they WON’T start levying charges for fear of scaring customers away. But if they have A black hole of UP TO £1BN they have to fill it from somewhere. My hunch is free banking is on the way out. Get your letter off to the banks now. I’ll have more on this story as it develops, and we’ll be posting some links on how to claim.
And if you are suffering with your finances just now, check out Financial tips of the week: adverse credit problems UK for advice on how to start repairing the damage.