Claim Bank Charges Back - Helping you to reclaim Unfair Bank Charges!

Hard up bank charge claimants are being urged to avoid unsympathetic courts and go direct to the Financial Ombudsman to reclaim their cash.

More bank customers suffering financial hardship due to bank charges have had their cash refunded through the Financial Ombudsman Service over the past year than through the courts.

Banks have been allowed to stall payment of reclaims until the end of the ongoing High Court battle thanks to the bank charges waiver that was granted by the City watchdog, the Financial Services Authority.

However, the waiver includes provisions for those suffering severe financial hardship due to hefty charges levied on them for going overdrawn to have their case heard - either through the courts or via the FOS.

Just 1,250 of those in financial difficulty have placed claims with the FOS, while the number looking for redress through the courts is likely to be many times that figure.

Just over a fifth have had their claims upheld by the FOS and had their money refunded by banks, while a further quarter have been judged to be suffering unduly due to the charges and are likely to receive refunds.

This means over 45% of cases heard by the FOS have been taken further, in contrast to anecdotal evidence from the courts – where it is believed the majority of individuals seeking redress have been turned down.

Although there are no official statistics for the amount of claimants turned down by the courts, a This is Money poll last month found three quarters of those who had sought money through the courts have had their case thrown out.

As claimants cannot apply to the FOS once the courts have considered their case and turned it down, this means any bank customers struggling to make a living due to unfair charges should apply to the FOS with their claim and discount the courts altogether.

Banks were so compliant with the 250 cases settled since the waiver was introduced last year, the FOS did not have to force their hand with a formal ruling, according to Emma Parker from the FOS.

She said: 'So far the process has been very co-operative. We have not had to make a formal ruling. We have talked to the banks and asked them to resolve the situation and they have, so it hasn't got to that stage.'

Of the approximate 1,250 financial hardship cases the FOS has dealt with over the past year, 250 have been successful, 300 individuals are judged to be suffering financially and are in the process of being dealt with and 700 were either not severely affected financially, or their difficulties do not directly relate to bank charges.

The amounts won over the year differ greatly and range from hundreds to thousands, according to Ms Parker. She added that success is not guaranteed in all cases and each claim depends on its own 'individual merits'.

In our website poll, 49% of readers who voted said they were finding it difficult to make ends meet due to unfair bank charges. Of these, a substantial 42% said they had carried their claim through to the courts in an effort to have their case heard under the banking waiver.

Of the latter, the vast majority at 75% had their case turned down despite their pleas that they were finding it difficult to survive because of hefty charges.

The eight High Street banking institutions at the centre of the High Court case are currently appealing a ruling made earlier this year, which allowed the Office of Fair Trading to assess the fairness of bank charges.

The appeal cannot extend beyond the end of 2008 but, if the banks are unsuccessful, the following battle between them and the OFT could extend until the end of 2009 or beyond.

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Confusion over whether business bank account holders can reclaim their bank charges may force the Financial Ombudsman to launch an official inquiry into the issue.

This is Money first reported in April that business bank account customers will no longer be able to reclaim unfair bank charges due to a landmark ruling in the High Court.

Although the High Court bank charges battle pertains to mainly to personal accounts, the judge at the centre of the case said at the time that business account charges are not penalties as such and can be enforced by banks.

The Financial Ombudsman's Service (FOS) has been processing business bank account claims since then, but is seeing an increasing number of small banks refusing to take part in the negotiation of business account reclaims.

Emma Parker from the FOS said: 'The judge said he didn't think that business account charges were penalties. It's a technicality, but it's affecting the stance of some of the smaller banks. The big banks are still settling claims on a goodwill basis but smaller banks are taking a step back.

'We're not at a point where we will have to have a formal inquiry yet, but that may be on the cards.'

The issue of business bank account charges has been frustrating for those small businesses wishing to reclaim their charges over the past few months as the High Court has refused to clarity its ruling.

Official bodies such as the FOS, the Financial Services Authority or the Office of Fair Trading also do not know whether these customers can technically continue to reclaim.

Up until the April ruling, business account holders were able to continue reclaiming despite the general waiver granted to banks on reclaims as, unlike personal accounts, business accounts are covered by common law instead of consumer law.

However each type of customer can still suffer charges of up to £39 a time for incursions into 'unauthorised' overdrafts.

The judge said in the small print of his ruling in April – which is now being appealed by the eight High Street banks involved – that 'the terms now generally used by the banks' in relation to business accounts could be enforced.

Some commentators have suggested the phrase 'now generally used' means only charges levied over the past 18 months cannot be reclaimed – and those customers with charges going back over a longer time period may still be successful.

The situation will remain unclear however until one of the official bodies mentioned above clarifies the meaning of the original ruling.

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Banks will rake in £1.3bn over the next six months after being allowed to carry on levying punitive overdraft fees.

The bonus comes as a result of their dragging out a long-running court case on the legality of penalties of up to £38 a time for unagreed overdrafts or bouncing a cheque.
The Office of Fair Trading (OFT) launched a High Court battle against the banking industry and won an initial judgment that should ensure refunds are paid.

However, the banks are pushing the case through the appeal courts with the result that payments are being delayed and charges are still being imposed.

The City watchdog, the Financial Services Authority (FSA), has allowed the banks to put the handling of complaints and refunds on hold until the case is settled.

The move has been described by critics as 'a kick in the teeth' for millions of customers. This so-called waiver was introduced in July last year and was due to end this month - a year in which the banks will have collected £2.6bn in overdraft fees.

Yesterday, the FSA said it would allow the waiver to run another six months, until January 2009, allowing the banks to collect a further £1.3bn.

There is every chance the banks' appeal will go all the way to the House of Lords, which could delay any compensation for customers until well into next year.

The FSA said the delay will not affect the ability of bank customers to claim refunds of charges going back to 2001 once the case is finally settled. And while a general waiver for dealing with refunds has been established, the banks will be required to handle complaints involving customers suffering real financial hardship.

Louise Hanson, of the consumer group Which?, said: 'Scrapping the waiver won't get people their money back. Only the banks can do that by conceding defeat and paying up instead of continuing to string out the process.'

Dan Waters, of the FSA, said: 'Our objectives continue to be certainty over this complex issue and a fair and consistent resolution of consumer complaints about unauthorised overdraft charges.

'The FSA has reviewed the circumstances and has decided to offer firms a new waiver for six months, when we expect to have a Court of Appeal decision.'

The watchdog has the power to lift the waiver if it believes the banks are dragging out a resolution of the case unnecessarily.

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A major High Street bank has broken the terms of the legal waiver that allowed it to put all overdraft charge complaints on hold.

Bank of Scotland, part of the giant HBoS group, appointed debt collectors to chase a customer who had contested charges imposed when he accidentally went into the red.
Under the legal waiver drawn up by City watchdog the Financial Services Authority (FSA), banks have been given permission to put on hold all bank charge complaints until their court case with the Office of Fair Trading has been resolved.

But they are not allowed to close a customer's account or do anything that adversely affects their complaint.

Bank of Scotland had admitted that the account was 'accidentally' sold to a debt collection agency and that, under the terms of the waiver, this should not have happened.

The customer, who does not want to be named, had sought a refund of £2,113.27 worth of bank charges in December 2006. The complaint had been acknowledged, and he and the Bank of Scotland had exchanged a series of letters.

When the OFT court case was announced, the customer's complaint, like thousands of others, was put on ice. He had dipped overdrawn by just a small amount - £40. On the back of this, charges mounted.

Bank of Scotland charges £35 for bouncing or paying a cheque or transaction if you are beyond your overdraft limit. It also charges £28 a time for dipping into the red.

He was soon in financial difficulty as charges started to be imposed on charges - pushing him further into the red. By the time he was told of the waiver, he was almost £1,000 over his £1,250 authorised overdraft.

He stopped paying his salary into his current account as it was only enough to cover the bank charges. Last month, he received a further letter from the Bank of Scotland stating: 'As previously agreed with the Financial Ombudsman Service and FSA, customer complaints relating to unarranged overdraft charges will remain on hold.'

However, Bank of Scotland then cancelled his authorised overdraft.

On July 8, CapQuest Debt Recovery wrote stating that his White Label Current Account 'together with others' had been 'sold' and that it had been appointed to 'manage your account in all matters relating to collection and litigation'.

It also stated: 'Legal action will increase the amount you owe and may have a detrimental effect on your credit worthiness.'

Under the FSA waiver, current accounts still run in the normal way - you can still incur unauthorised overdraft charges and the actual account is not frozen. This has confused many.

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'No-WIN, no-fee' claims handling firms are billing customers whose disputes over bank overdraft charges have been put on hold because of the ongoing High Court case.

These so-called 'ambulance chasing' firms promised to win back thousands of pounds of charges incurred when customers accidentally went into the red. Their price was a cut of any money reclaimed.

However, all bank charge complaints have been on hold since July 2007 until a High Court case between the Office of Fair Trading and the major High Street banks and Nationwide building society is resolved.

The OFT won the first round two months ago - the next round began in the High Court this week.

The point of the case is to discover if unauthorised overdraft charges, which can be as high as £39 a time, are fair.

Campaigners hope if the OFT finally wins then anyone who has accidentally gone overdrawn in the past six years will automatically get their charges refunded.

Because the outcome of this case rests solely in the hands of a High Court, and after waiting for more than a year, customers have told the claims handlers their work is over. However, when they cancel the claim they are told there is a fee of up to £35 a time to get back their paperwork.

Other companies which are still offering to win back charges have started asking for a £30 deposit before starting their case.

One reader told how she had paid this to Claims Justice, which cold-called her and persuaded her to hand over £30 for taking on her case. This would be deducted from the 25% plus 17.5% VAT the firm would take of any money she reclaimed.

She says: 'I realised I had made a mistake and I wanted to cancel the claim.

'I have rung them five times and sent three e-mails and left messages, but to no avail. They have not responded.'

We tried to call Claims Justice but no one responded to our calls either.

We have always advised never to use these bank reclaim companies. This is because you would still need to fill out exactly the same number of forms as if you were reclaiming charges yourself, and your chances of winning are just as great.

Furthermore, any claim you win would only reimburse you for money lost - it is not compensation. So, if a claims-handling firm takes a percentage of your winnings you are worse off than you should be.

Despite all this, the promise of no-win, no-fee proved too great for many.

Some also found themselves signing up for a claims-handling service when they thought they were actually taking part in one of the many free consumer groups that can be found on the internet.

Marc Gander, from the campaigning Consumer Action Group, says: 'There has been absolutely no need to use one of these claims handlers and especially now there is a court case.

'If you think you are owed overdraft charges, complain now - the bank is under no obligation to resolve your case until the court case is over.'

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Banks are making £2.5bn profit a year by charging customers who dip into unauthorised overdrafts.

The Office of Fair Trading is expected to reveal the figures later this month as Britons struggle to cope with the rising cost of living.
There have been hundreds of thousands of claims from people trying to get refunds on overdraft charges - which could see banks having to pay back almost £10bn.

Banks will be forced to reimburse their customers if the OFT wins a court case it is pursuing against them. Bank fees can be as high as £35 for a bounced payment.

The trading watchdog is preparing to release figures that will show for the first time how much banks make from charges on unauthorised overdrafts. The statistics will make up just one part of the OFT's review of the banking industry in a damning report.

An OFT spokesman confirmed the regulator is due to publish its findings later this month.

In the most recent court judgment against the banks, Mr Justice Smith made reference to OFT evidence on overdraft charges.

The OFT have been provided with figures that showed high street banks under investigation received a total of £2.5bn on an average daily unarranged overdraft total of £0.6bn.

Mr Justice Smith ruled in April that the courts are entitled to assess whether these charges are fair.

Nine banks, including Lloyds TSB, HSBC Royal Bank of Scotland Barclays and HBOS, are appealing and some are thought to be ready to go to the European Court of Justice.

Today Mr Justice Smith will begin another hearing to examine the possibility of challenging overdraft fees going as far back as six years.

One senior source at a top bank said: 'In many other countries, people have to pay for their current accounts. We've polled customers and nobody wants to pay a monthly fee for their current account.

'We have costs maintaining the network and overdraft charges are charges for a service. Fees for that service help provide free banking.

A spokesman for the British Bankers' Association said: 'Banks believe their fee structure is clear and obvious because they make it clear in their terms and conditions when they write to customers.'

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Barclays is attempting to side-step the High Court case on 'unfair' overdraft charges with the new charging structure it introduced last week, according to banking lobbyists.

The bank announced it will reduce its unauthorised overdraft charges from £35 to £22 and bring in a 'personal reserve' buffer of £250 on average above customers' agreed overdraft limits.

The new 'personal reserve' offer aims to reduce costs incurred by going overdrawn without permission, but will allow customers to go even deeper into debt than their overdraft facility allows.

It costs £22 to go into the personal reserve and, once there, you can make as many transactions as you like over a five-day period. If you exceed the reserve limit, all payments will be bounced at a cost of £8 per transaction.

But because customers have to sign up to the reserve, campaigners against unfair overdraft charges believe the bank is trying to circumvent the overdraft case running in the High Court.

The personal reserve will come on top of existing overdraft levels and could be as large as £1,500.

Marc Gander, founder of the reclaim charges organisation Consumer Action Group (CAG), said: 'The High Court has already thrown out the banks' argument that these charges are a service, so clearly the banks would like to change things so that the penalties look more like a service.

'Barclays is doing this by giving consumers the chance to voluntary partake in this 'reserve', which most people will do if they are strapped for cash. But in some cases, the changes could work out more expensive.'

He points to the fact that, although the bank has lowered its initial overdraft charges, it has raised the rate on its agreed overdraft from 15.5% to 18%. This is well above the average rate on authorised overdrafts at 14.8%, according to price comparison website MoneyExpert.com.

CAG is about to submit a complaint about Barclays' charges overhaul to the Financial Services Authority. It believes the changes are 'misleading', will not leave customers better off, are an attempt to circumvent the High Court case with the OFT and contravene new Government regulations introduced last week.

These rules, the Consumer Protection from Unfair Trading Regulations 2008, warn traders to be professionally diligent and not to 'materially distort the economic behaviour of the average consumer': the average consumer must not be convinced onto buying a product they would not otherwise have bought.

Mr Gander added: 'Not only do we believe Barclays is in violation of all of these things by promoting the change to its bank charges, but without a doubt these changes have been made so that it can pre-empt any unfavourable rulings from the High Court.

'Even though customers now have to consciously sign up to the 'reserve', we believe that charging someone unnecessary high rates still does not make it a 'service'.'

His comments mirror those of the OFT in November of last year when it attacked the banks' defence that their overdraft penalties were a charge in return for a service.

Banks generally do not tell the customer in advance whether they will honour a payment that pushes the customer over their agreed overdraft limit; the OFT argued that merely deciding to offer someone a loan and then charging them regardless of the outcome was not a service.

However Barclays seems to have side-stepped this criticism by guaranteeing a personal reserve to all customers who are charged the £22 fee. So customers are being charged for an actual overdraft extension – arguably a service – and not merely for the bank's time while it considers whether to offer one.

Barclays' move may make them 'legally unchallengable', according to CAG's legal adviser, Doreen Saunders, a law lecturer at Farnborough College of Technology.

However charging £22 for five days is still 'morally wrong' when its peers charge over a monthly period, she said.

A post on CAG's website states Barclays' move is a 'blatant attempt to evade the possibility of the charges being found unlawful in a court of law' and shows readers how to make an individual complaint to the FSA.

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Please note that the following article doesn't concern bank charges. However, I have decided to add it to the site, as it's important news regarding a long overdue shake up of the banking system, and will eventually be to everyones benefit.

The faster-payments system that will allow banking customers to move money between accounts in just two hours is set to be launched next week, although not all banks have signed up to the service.

It currently takes two days to carry out these transactions, but millions of customers will not be able to avail themselves of the system next week, as it will initially only cover 5% of internet and phone payments when it is launched on Tuesday.
Standing orders will be included in the mix from June 6, while the system will be expanded to include 50% of all personal account payments by August.

This will benefit up to half of the 27.5m people who use telephone or internet banking in the UK.

Business account customers will not be able to use the service until the end of the year, when all internet and phone payments should fall under the system. It will not cover cheques and is not needed for direct debits as these are already virtually instantaneous.

The seven institutions from which you will be able to send and receive payments from next week include Barclays, Citibank, Northern Bank, HSBC, Lloyds TSB, Yorkshire and Clydesdale Banks and Royal Bank of Scotland (which includes NatWest and Ulster Bank).

However you will only be able to transfer a maximum of £5 at first with Barclays, which will raise this limit to £100 by early June and £10,000 by July 16.

Customers of Alliance & Leicester, HBOS, Nationwide and Northern Rock will only be able to receive payments initially.

The Co-operative will begin receiving faster payments in July and Abbey will come on board by the end of the summer.

If you are caught for time and want to find out whether your account or that of a payee has signed up to the service, simply enter its sort code into the account checker provided by the Association of Payment Clearing Services (Apacs) at www.canipayfaster.co.uk.

Paul Smee, Apacs chief executive said: 'The final part of this enormously complex project has been to test the new system in a live environment. This week hundreds of penny payments have successfully been made between the participating banks.'

The faster payments system was due to be introduced last year but was delayed when IT testing took longer than expected.

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The eight High Street banks at the centre of the bank charges battle will lock horns with the Office of Fair Trading again today when they meet at the High Court.

The two-day case conference will see the banks state whether they want to appeal the judge's recent decision, which ruled that the terms and conditions on overdraft accounts can be assessed for fairness by the OFT.
If the banks appeal, the case could be held up for several weeks. However, if they cede defeat on the recent ruling, the case will move on to assessing the fairness of the actual charges themselves under the industry's Unfair Terms in Consumer Contracts Regulations (UTCCR).

A spokeswoman for the BBA said that the banks had yet to decide whether to appeal the case, and the two-day debate would involve clarifying many of the technical issues relating to the judge's earlier pronouncement.

Unsurprisingly for such a complex case, the banks will not be able to appeal the entire judgment wholesale, but only individual clauses they disagree with.

It is also believed the judge will provide both sides with a roadmap for the future of the case outlining when major hearings will take place.

It is the next significant step in the legal battle over the fairness of unauthorized overdraft fees, which in some cases have been as high as £39, and generate over £3.5bn in annual profits for banks.

Bank charge campaigners welcomed the possibly that the banking industry may forgo an appeal, which would otherwise hold up the progression of the case for several weeks.

Marc Gander, from the charges campaign organisation Consumer Action Group, said: 'So far, the judge has said that these charges come within the consumer regulations. If the banks do not appeal, then the whole thing can move onto the central argument of whether the charges themselves are fair.'

If the banks do not appeal, the OFT will be able to begin its overview immediately, which it is expected to deliver in July. The case will then go on to another High Court hearing that may propel proceedings into 2009.

In its case against the banks, the OFT argued that unauthorised overdraft charges were not simply a fee for a service integral to an account, as the banks claimed, but a system that encouraged people to spend money they should not have access to while allowing banks to profit.

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Business bank account customers will no longer be able to reclaim unfair overdraft charges from their bank following this week's landmark High Court ruling.

Although the judge at the centre of the case ruled that the excessive penalties levied on personal account holders by eight High Street banks could be assessed for fairness by the Office of Fair Trading – he cast business account customers out in the cold.
Business accounts are covered by common law instead of the consumer law governing individual's current accounts, even though each can suffer charges of up to £39 a time for incursions into 'unauthorised' overdrafts.

On Thursday, Justice Andrew Smith dealt a blow to owners of small businesses by declaring in the small print of his conclusion into the case that he accepted the banks' argument against the part of the case used to reclaim business account overdraft charges: namely, that they are not penalties and can be enforced.

While the OFT case was specifically about personal bank account charges and whether the Unfair Terms and Conditions in Consumer Contracts Regulations applied to them, the judge's ruling on whether charges were penalties is likely to affect the business bank account common law argument.

However, Mark Gander, bank charges expert from the Consumer Action Group, said customers making claims going back more than 18 months may still have a chance to do so.

As the judge referred to the terms and conditions in question as 'the terms now generally used by the banks', he could merely be referring to present terms and conditions and not to historic terms used on accounts before banks began to amend them over the past 18 months.

But it is difficult to differentiate between 'historic' and 'current' terms, according to Gander, founder of the bank charges lobby group.

He said: 'This ruling means businesses are completely ruled out of the bank charges battle at the moment, although the judge did leave it all slightly up in the air because he mainly referred to present terms and conditions.

'People with claims dating back several years may still have a chance if they get their claim in as soon as possible but, to be honest, it's unlikely. Banks will interpret this as a ban across the board. It's a disgusting shame the way these people have been left out in the cold.

'Banks assume that business customers can field these charges but they are just as vulnerable as ordinary people. We're not talking about multi-nationals here.'

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