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

The Tories 'white paper' on banking reform, released today, is the first major political document to brand bank charges 'unfair' and would force overdraft, credit card and mortgage charges to be clearly shown.

Among details of the party's plans for sweeping financial reform, it says: 'There have been numerous examples of unfair treatment of consumers – the mis-selling of payment protection insurance and unfair bank charges.'
Although the Competition Commission restricted banks ability to charge PPI earlier this year, it is still unclear whether the OFT will win its legal battle with eight High Street banks over the fairness of bank charges.

If the case, currently in the House of Lords, drags on past the next general election, which the Tories are expected to win based on current opinion polls, it is unlikely a new Government would be able to intercede.

The Tories' white paper also details how the party would set up a new Consumer Protection Agency.

This will take over the oversight of consumer financial matters from the Office of Fair Trading (OFT) and other powers from the Financial Services Authority, which would be abolished.

Banks and credit card providers have to be clearer about their charges, the paper recommends, before saying the party will set-up an independent financial website highlighting whether individual products are any good.

Providers will have to include a standard 'summary box' on all documentation sent to customers, which should make it easier for them to compare products.

All very welcome, with a hint of deja vu...

This is Money's banking and credit card correspondent Alan O'Sullivan says: The fact that a major political party has come out and branded bank charges unfair should be celebrated although, given the legal case on charges is now in its latter stages, they could have stepped in sooner. If they had – and forced Labour into tagging along with them – then the entire legal debacle with the OFT could have been avoided through a Parliamentary vote.

Although the wider changes to the banking system outlined in the white paper smack as necessary, given the tripartite system's overall failure on banking regulation, it is still unclear whether the Tory plans will greatly help consumers on a day-to-day basis.

For example, what is this Consumer Protection Agency other than an OFT by another name? From anecdotal evidence, it appears the OFT takes quite a while to deal with consumer complaints, given the tidal wave it has to deal with.

It takes thorough investigation and time before it will ever 'name and shame' a company, and this only happens after said company has carried out particularly heinous crimes over a long period. But that's understandable, in a way, given the number of companies it has to regulate (125,000 with consumer credit licenses).

How will this CPA do things differently? More people and funding? We've heard all that before.

And the Tories plan to create an independent website over all financial products? The OFT promised in February 2008 to create a truly independent credit card comparison website for consumers – which we're still waiting for.

This is one reason why the status quo should perhaps be shaken up, but it also means these shiny new promises may be written on the same Whitehall headed notepaper.

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The legal debate raging in the House of Lords over banks' obligation to repay charges and fees to customers has thrown up a new anomaly that could alter the outcome of the case.

One of the banks' barristers, Jonathan Sumption, alleged in the House during the week that a consumer victory would cripple banks financially, forcing them to return billions of pounds in past overdraft charges and pay what he terms 'restitution'.
Marc Gander - the head of the influential bank charges lobbying organisation Consumer Action Group (CAG) - has interpreted this as meaning banks would not only have to refund any bank charges levied on customers: they may also have to repay any of the profit they earned from investing the funds in the interim.

If the Office of Fair Trading (OFT) wins its legal battle against eight High Street banks, any 'restitution' payment could substantially swell any potential repayments to customers, who could receive all their refunded charges as well as a portion of any profits the banks have made from investing them.

However, there is disagreement over what the legal term 'restitution' could mean and the impact this could have on the banks and their customers' claims. There is also debate over whether customers may be able to reclaim all charges levied over an extended period of 19 years in the event of an OFT victory, instead of just six years as previously thought.

The legal term 'restitution' means the claimant in any case must receive compensation that restores them to the same financial position they were in before their claim. However, it can also mean the defendant, in this case the banks, must hand back any profit made from the disputed funds, termed 'unjust enrichment'.

If banks' overdraft terms are found to be unfair, consumers may also be able to reclaim funds back as far as 1995 – the year European rules on consumer contracts came into force – and as far forward as six years after any judgment from the House of Lords, due this autumn.

Currently, customers can only claim back six years from the date of their claim.

Daniella Lipszyc, a contract specialist and director of Manchester-based law firm Ultimate Law, said there is a 'fair chance' claim periods may be extended, but dismissed the chances of consumers sharing in banks' profits as a 'flight of fantasy'.

She said: 'It may be arguable as a point of law, but the argument is obscure and I think there is little chance of claimants getting a slice of this. Restitution usually means a person just gets back the money they have lost.'

However Mr Gander, a former law lecturer, added: 'The banks wouldn't have made such a big deal out of this term if it just meant the repayment of charges. They're running scared and petrified of not just losing billions in bank charges, but the tens of billions in profits they made from them. Claims could literally balloon.'

It is difficult to price the possible fallout if banks lose their legal case, but Nationwide Building Society said during the week that 12.6m people paid overdraft fees across the industry in any one year. A survey by CAG of 10,000 claimants found the average bank charges claim has been worth £1,800 in recent years.

Any possible repayments could therefore cost the banks billions of pounds, which could be multiplied several times over if they are also expected to part with profits earned from these funds.

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Bank charges can now be assessed for fairness by the Office of Fair Trading after the High Court ruled in its favour today.

The announcement could mean bank customers will be able to reclaim billions of pounds in punitive bank charges later this year, if the OFT decides the charges are unfair as expected.

The ruling comes at the end of an appeal case brought in October last year by the eight High Street banks following the High Court's similar ruling in favour of the OFT the previous summer.

However, the banks have the right to appeal this judgment yet again to the House of Lords, potentially delaying the OFT's investigation by a further six months to a year.

The British Bankers' Association confirmed the banks have put in a request to see if they can appeal to the House of Lords, but stressed this does not mean they plan to proceed.

A spokesperson said: 'You have to ask if you can appeal before you decide if you are going to appeal. It's just a legal process. The banks are keeping their options open.'

Even if the banks do not appeal, consumers will not be able to reclaim their bank charges until the OFT delivers its final assessment on whether the charges are fair.

It has already begun its investigation into the overdraft charges and, if banks do not hold up the process further, it expects to report its findings later this year.

The OFT said in a statement: 'The Court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations for these terms. 'We are now analysing the implications of the judgment for our ongoing investigation.

'The OFT has already written to the banks with its provisional view on the fairness of the terms, setting out its concerns that they may be unfair. We expect to reach a final decision on fairness later this year.'

However, it warned the process would be complex as the investigation involves each bank's terms and conditions over the past six years.

Banks have claimed today's ruling could spell the end of free banking in the UK as the banks could lose up to £2.6bn a year in lost revenue as a result. However, campaigners argue it is wrong to subsidise fee free banking by treating other customers unfairly.

Furthermore banking industry experts doubt that banks will pull fee free bank accounts due to the huge cross-selling opportunities they offer compared to their relatively low cost to run.

Banks could have to refund billions in bank charges levied over the past six years. RBS is already planning to proactively refund all bank charges to its customers if it eventually loses its case against the OFT.

Marc Gander, head of the bank charges campaign organisation Consumer Action Group, said the banks will think twice before fighting today's judgement.

He said: 'The only thing that would stop the banks appealing is their public image. To drag this on yet another year by taking it to the House of Lords after delaying the case a year already, I think would mark them out as the people's enemy when their reputation is bad enough already.

'I'm not sure they would have the gall to do that. They may be so reluctant to draw this on that they may throw the towel in.'

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The High Court is due to give its verdict today on the appeal made by eight High Street banks against its ruling on bank charges last year.

The appeal case, started in October of last year, is an attempt by the banks to overturn the decision made by the Court that punitive bank charges can be assessed for fairness by the Office of Fair Trading (OFT).

If the banks lose the appeal, bank customers will not be able to reclaim their charges immediately, but the OFT will have the green light to assess bank charges for fairness under the Unfair Terms in Consumer Contract (UTCCR) regulations.

If they find the charges are unfair, customers should then be able to reclaim from their bank, this follows a hold put on reclaiming since the case was announced in summer 2007.

If the banks win, it could spell the end of the entire consumer battle to reclaim billions in unfair bank charges.

That is if both parties decide not to appeal the decision yet again, however.

The banks could put in another appeal to the House of Lords should they lose a second time, which would drag any potential end to the case into 2011. If the OFT loses, it is likely it will get the opportunity to question the appeal decision.

Marc Gander, head of the bank charges lobby organisation Consumer Action Group, said he is sure the OFT will be given this option.

He said: 'I'm sure the judge would grant the OFT the right to appeal in the very unlikely event it loses. It would even things up: each side would then have appealed one of its rulings.

'The only thing that would stop the banks appealing is their public image. To drag this on yet another year by taking it to the House of Lords after delaying the case a year already, I think would mark them out as the people's enemy when their reputation is bad enough already.

'I'm not sure they would have the gall to do that. They may be so reluctant to draw this on that they may throw the towel in.'

A spokesperson for the British Bankers' Association said they didn't want to second-guess the case before the judgment tomorrow. The OFT also declined to state how it will act depending on the announcement.

The OFT announced originally it was taking the High Street banks to court in July 2007 after a wave of public disquiet over bank charges, which could be up to £38 for a minor incursion into an unauthorised overdraft.

The Financial Services Authority granted banks a waiver at this time, allowing them to put all claims on hold until the OFT test case in the High Court is completed. All reclaims have been stalled until the High Court case has been settled, unless a customer can prove they are suffering from financial hardship as a result of the charges.

Either side of the battle has the right to take the case to the High Court, followed by the European Courts until they could be forced to cede defeat. If so, it could take years for the case to conclude.

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Big banks have been urged to back down on their multimillion pound court case on rip-off overdraft charges.

Taxpayers have now pumped hundreds of billions of pounds into the banking system, and are major shareholders in Lloyds TSB and Royal Bank of Scotland.

If the seven banks and one building society dropped their High Court action it would put an end to the misery being piled on those customers that have now had to bail them out.

The banks have spent millions on expensive lawyers already.

They could accept a ruling made by the High Court last April which gave the Office of Fair Trading the right to decide at what level unauthorised overdraft charges should be.

This would put an end to the wait to the estimated 10m customers who have had their complaints about these fees put on hold since the legal case began in July 2007.

Campaigner Marc Gander, founder of the Consumer Action Group, says: 'We ought to put this nonsense to bed quickly. Many have got black marks on their file, and debt collectors on their backs.

'Some even face being repossessed for these unlawful charges. It's a disgusting injustice that is being done by banks that we now own.'

Banks are said to be raking in around £3.5bn a year in fees paid by customers who accidentally go in to the red. These charges were as high as £39 a time and were imposed for using an unauthorised overdraft, or bouncing or allowing payments when in the red.

They frequently spiralled so that consumers built up debts by incurring fees because of their existing fees

Our Fair Play on Charges campaign has been challenging banks fees since 2005. More than a million people have used advice provided by Money Mail and our sister website thisismoney.co.uk to reclaim charges.

They did this by using consumer regulations to claim that the charges were excessive and did not reflect the cost to the bank of your transgression.

It is these consumer regulations that the banks - Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds and RBS/NatWest - and Nationwide Building Society are contesting with the Office of Fair Trading.

The OFT argues the rules allow it to make a decision on whether bank charges are fair. The banks say that the OFT has no authority.

Since this court battle was announced 18 months ago, banks were granted a waiver by the City watchdog Financial Services Authority to put all bank charge complaints on hold. Consumers can still begin a reclaim, but the banks do not need to investigate it until the court case is resolved.

At the moment there is no sign of this happening. Every ruling made by the High Court is appealed against. It means that thousands of customers still in the red because of the charges they have racked up have little sign of getting their money back.

Even if the banks do back down, this will not mean an immediate end to this case. But it will give the OFT the chance to decide once and for all on what is a fair fee to pay for accidentally going overdrawn.

It published an in-depth study into the current account market last July, and is in discussions with the banks about seeking a remedy to some of the problems it discovered.

A spokesman for the OFT says: 'Our investigation into whether bank charges are unfair is ongoing and we are awaiting the result of the appeal court.'

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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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