The Times - Battle of the bank charges hots up with legal challenge

A court hearing tomorrow could mean millions of people will be able to claim a bigger refund

MILLIONS of people who have successfully reclaimed unfair bank charges could be due a bigger refund if a landmark court hearing tomorrow gives them the green light to sue their banks.

Tom Brennan, 30, a junior barrister from south London, is taking NatWest to court in relation to £2,500 that was taken from his account in unauthorised credit and bounced payment fees while he was a student.

Campaigners believe a successful legal claim could open the floodgates for billions of pounds more in refunds.

The banks are under growing pressure to come clean on charges after the Office of Fair Trading launched a full-scale inquiry into the fees they raise on personal accounts last week. The investigation will run alongside an existing investigation into the fairness of unauthorised overdraft charges announced earlier this year.

However, the OFT is not expected to come to any conclusions until the end of this year.

Tired of waiting for action, some savers are now pushing the banks to take them on in the courts. So far, no ruling on the legal status of the charges has been made. Every customer who has challenged their bank has settled out of court. But Brennan is determined that his case will be heard.

Alongside a full refund with interest, he is calling for aggravated and exemplary damages – a first in bank charges claims.

He also wants to contest the rule that you can only claim for charges going back six years. If his challenge is successful, even people who have already reclaimed penalty fees may be able to go back for more.

Brennan’s stance is already inspiring others to take legal action against their banks.

Stephen Hone, who set up Penaltycharges.co.uk, will file a case against Cooperative Bank tomorrow. He is not claiming back any money, but wants to find out if the charges the bank levies are illegal.

Andrew Hagger at Moneyfacts, an analyst, said: “If these cases are succesful banks will have to admit exactly how much it costs to process a bounced cheque or administer an exceeded overdraft.

“Perhaps more significantly, if it is shown that the charges banks levy are illegal, it could open the floodgates for millions of consumers to take their banks to court and win damages.”

Brennan believes he has the banks running scared, adding that his treatment by NatWest highlights just how keen banks are to keep cases out of court and avoid a successful prosecution.

Earlier this year he was sent a cheque for £4,000, or almost twice his claim amount, which he rejected. The bank also argued that it had already refunded his charges by putting £2,500 into his account in February.

However, Brennan said this money was “forced” into his account as he had not accepted it. His account was closed by NatWest earlier this month.

“I even had a sit-down meeting with the bank where they tried to dissuade me from going ahead, but they are not going to stop me,” he said.

A spokesman for NatWest said: “Mr Brennan has brought a claim against NatWest. That claim is the subject of ongoing defended court proceedings and it would be inappropriate to comment further.”

Tomorrow’s hearing will decide whether the case will proceed to a full trial. If it does, Brennan plans to challenge the six-year limit based on a clause in what is called the statute of limitations. In most small claims that don’t involve personal injury, you are allowed to make claims for losses that go back six years and no further. However, Brennan believes the statute could exempt savers from this limit.

He said: “I am of the opinion that you can claim for more than six years. There is a provision in the statute of limitations that allows you to do this if you can prove there has been deceit on one party’s side.”

Brennan will also question if banks have been making illegal profits from bank charges.

“The banks have made billions by investing the money they have made illegally, and the law is quite clear, you cannot profit from your wrongs,” he said.

Last week, Alliance & Leicester appeared to concede that penalty charges had been used to boost profits after it acknowledged that a fee of only £4.50 might be a fair charge for going overdrawn.

The bank put this charge forward in a letter sent to a customer to settle a claim for the refund of £2,035 in overdraft fees. The bank’s standard charge for bouncing a cheque is currently £25.

A spokesman for the bank said: “Alliance & Leicester treats each request for a refund of fees case by case and on its individual merits.

“We believe that our fees are fair and are clearly outlined to the customer and we have not accepted that £4.50 is a fair charge for unpaid items.”

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