End is nigh for unfair overdraft charges

Although I very much support account holders who have been charged for going over their unauthorised overdraft, I was quite concerned about how the banks could afford to pay out the refunds if they had lost this case. Some suggest the sum they would have had to cough up would have been around the £24 billion mark. 

In addition, the banks receive around £2.6 billion income every year from bank overdraft charges and other current accounts so this is a very great sum of money to lose.

Had the banks lost, another problem could have been the issue around credit ratings marked down through missed payments on loans. This would then have been deemed unlawful. I dread to think of the ensuing litigation.

There is a small chance that the Office of Fair Trading (OFT) can still do something and I hope it is successful. I expect its lawyers will be scrutinising every word, but we will have to wait for its announcement next month to see what it plans to do next.

I believe this is actually the beginning of the end of excessive unauthorised overdraft charges as the banks have already started to cut their fees. There will be more competition from the banks, which will in turn bring down fees. The question though is, to what level?

There will be the odd bank or two that will still try and get away with high charges, but as customers can move banks this will not be a massive problem.

Some will claim the ruling is a good result for the taxpayer, but mainly from those who do not have bank charges to contend with. I understand this to a point, but spare a thought for those who just cannot get out of the bank charges trap. They are actually ‘funding’ our current free banking system.

I feel it’s wrong to expect those who struggle financially to pay for free banking for those who are better off. I’m sure some will argue these people need to manage their money properly, but most have triggers in their lives that start the debt cycle off. These include redundancy, illness or separation and along comes those dreaded bank charges. For some there is just no escape and they were pinning their hopes on the OFT winning the case.

Those who are currently struggling with bank charges should be refunded the difference between what is deemed to be a reasonable cost to the bank, say £12 and the actual penalty applied, usually £38, and this should go back as far July 2001. They should also be offered help and guidance on their finances.

It’s time to put a stop to banks using customers as easy pickings to inflate their profits. They have vast amounts money, some of it public funds, with which they use to beat down the honest and hard-working consumer.

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Your Comments

The bank charges are and always will be excesive a resonable amount would be accecpteble and almoust expected if one was in difuculties but for banks to exploit people with or having difficulties is aborant when tax payers bailed them out when they had dificulties , its about time this was all sorted and if the usless goverment cannot have the gumption to do it then lets hope the up comming election shakes this country to its core ,we are all fed up at being ripped off here in every imaginable way by this country and its liberal outlook no one has the strength to stand up and say enough is enough ,we should have let the banks fold and then build a goverment national bank from the ashes and got rid of the fat cat people that drag this country down including the also aborant goverment expences which i am sure we only got the half of in information,i just wish i could win lotto i would be out of this shit hole soon as.

Mike Thomas is the Moneywise Debtwizard

Hi. Below I have detailed something for you about 'financial hardship' rules in case this applies to you.

Financial hardship
There are various definitions but basically you are experiencing financial hardship if you are struggling to meet your commitments each month; however this can then be further compounded by the banks adding interest and charges for late or missed payments.

Another example is whereby you are not able to meet your basic needs with the money you have coming in and you are behind with council tax or court fines, you are about to have your home repossessed or your only income is that derived from benefits.

You may need to provide evidence of any changes in lifestyle such as relationship breakdown or death of a partner, loss of employment or starting a lower paid job. Other examples of financial hardship could be demonstrated if you are suffering from some form of disability or serious illness, starting full time education or are currently in or have recently been in prison.

Below are examples of financial hardship taken from 'The Banking Code' 

loss of employment; 
serious illness;
relationship breakdown;
death of a partner;
starting a lower paid job;
parental/carer leave;
starting full-time education.

Other examples are

items repeatedly being returned unpaid due to lack of available funds;
failing to make loan repayments or other commitments;
discontinuation of regular credits;
notification of some form of insolvency or court proceedings;
regular requests for increased borrowing or repeated rescheduling of debts;
making frequent cash withdrawals on a credit card at a non-promotional rate of interest
repeatedly exceeding a credit card or overdraft limit without agreement
receiving more than £500 per year in bank charges

How do I know if I qualify?
There are no set rules; it is your decision according to what is happening in your life such as above. If you honestly believe you are suffering financial hardship then consider getting some help from the banks.

Is there a template letter I can use?
You do not necessarily need one, you can telephone the bank and state that under their banking code you feel you should be considered under their hardship rules, alternatively you can write to the bank more or less stating the above.

What is the banking code?
This is a voluntary code which sets standards of good banking practice for financial institutions to follow when they are dealing with personal customers in the United Kingdom. It provides valuable protection for customers and explains how financial institutions are expected to deal with them day-to-day and in times of financial difficulty.

I think I have a good case to claim under the financial hardship guidelines, what should I do?
You will need to contact your bank and inform them that you believe the hardship rules apply to you and that you would like your case to be given priority.

It does not matter whether you have entered a claim for bank charges and it is on hold waiting for the test case outcome or if you are about to start a claim.

In response to you contact with the bank they should send back a form to complete known as a 'common financial statement' or 'income & expenditure form'.

What do I do if the bank ignores my request to be dealt with under 'financial hardship?'
If the matter is not resolved within 8 weeks you can then enter a complaint to the Financial Ombudsman Service, FOS.

The Financial Ombudsman Service (FOS) is a free, independent service which might be able to settle a complaint between a customer and a bank or building society. You can take your complaint to the FOS if you are not satisfied with the way the bank or building society has dealt with it or they have not completed their investigations within eight weeks of your complaint. The contact details of the FOS are as follows:

The Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
E14 9SR

Phone: 0845 080 1800
Website: www.financial-ombudsman.org.uk

Okay, what about complaints that involve bank charges as well as other banking-related problems such as financial difficulty?
It should usually be possible for the (FOS) to deal with all the parts of a complaint except the part that relates specifically to whether bank charges are lawful or not.

Trust this helps, any probs come back to me.