How to reclaim bank charges

If you’ve ever exceeded your agreed overdraft limit, or had a direct debit bounce, then you’ll have first-hand experience of bank charges. These are fees levied at current account customers, and can be as high as £39.

Bank charges have been in the news for several years, but especially since 2007 when the Office of Fair Trading (OFT) brought a test case to the High Court for the right to apply consumer contract regulations to bank charges and decide whether they are fair or not.

Since then the issue has been a matter of fierce legal debate. Despite the High Court finding in favour of the OFT, the seven banks and one building society involved in the test case appealed and the Court of Appeal was brought in.

On 26 February 2009, The Court of Appeal gave its verdict and quashed the banks’ appeal.

However, on 1 April the House of Lords gave the banks permission to appeal again.

Are charges too high?

Research carried out by the OFT suggests that charges are too high - since the beginning of 2006, thousands of customers have tried to reclaim charges that can be as high as £39 when an agreed overdraft is exceeded or a direct debit or cheque bounces. The OFT believes the extortionate charges do not reflect the true cost incurred by the banks, which is thought to be as little as £2.50.

If it is granted the right to take action on bank charges, then it is expected to cap these and demand the banks refund those they have penalised in the past.

So will I get my money now?

At the end of 2007, the Financial Services Authority (FSA) put a waiver in place removing the obligation for banks to deal with complaints and refund requests surrounding unauthorised bank charges until a final decision was reached.

This waiver was recently extended until January 2010.

However, if you have been hit by these charges, then you can still write to your bank or building society asking for your money back. Unless you can prove you are suffering financial hardship (see below), you will probably be told that no refunds will be given until the waiver is lifted. However, the earlier you get your request in, the sooner you should receive a refund once the waiver has expired.

The first thing to do is determine how much you can claim. You should be able to claim back bank charges from the past six years – as the FSA put the waiver in place back in 2007, this technically means you can claim back to July 2001.

Using the template letter below, ask your bank or building society to send you information relating to all default charges from over this time. Bear in mind you’ll have to pay a £10 fee for this information.

Then, use our second template letter to put in your request for a refund.

Financial hardship cases

The FSA has told banks they must continue to process claims where a customer is suffering genuine financial hardship. Unfortunately, there is not an exact definition of what constitutes financial hardship but, generally speaking, if you are struggling to meet your financial commitments (including the cost of living) then you could qualify.

Example of changes in lifestyle that could have pushed you into the financial hardship category include:

Loss of employment
A serious illness
Relationship breakdown
Taking a carer break to raise a family
Starting full-time education

Speak to your bank about your situation and see if it is able to help you.