Reclaim Your Bank And Card Charges

This is a classic article that tells you how to start your bank charges claim.

This article was first published in May 2006. Read this more recent article first before you start any claim. Five years ago I was young and very foolish, with a lower-case 'F'. I let myself get overdrawn several times, which cost me a little over £100 in penalties. But these charges are unlawful. I know I can claim them back, but so far I've been lazy. However, now that the Office of Fair Trading has got involved, today seems like the ideal day to get my act together. I'm going to tell you what I'll do to get my money back. Here's the background Banks and card providers charge penalties if you breach your contract by defaulting, making a late payment, going overdrawn, returning a bounced cheque, or if a direct debit or standing order fails. The thing is, they're not allowed to do this. What they can do is get you to cover the administrative costs that arise from it, but how much can it cost for a computer to print off a patronising automated letter, or to not process a direct debit? Not £25 to £40, but that's what they charge. As many of you will have heard, the Office of Fair Trading has decided that banks and credit card companies should charge no more than £12 for such breaches of contract. However, the only reason they set this figure was: "In order to swiftly reduce charges and avoid heavy-handed regulation." In other words, the charge is still too high, but they just quickly set a limit to help all consumers immediately. If they procrastinated over regulation instead, we'd take longer to see the benefits. Also, it'd cost businesses money to implement new regulations, and those costs would filter down to us. Since the OFT report, many people have already successfully recovered all of the charges plus interest that occurred in the past six years. (Six years is as far back as you can go in the courts.) You can do this too, whether you're claiming against your bank's charges or your card provider's. Here's the four-stage plan I'm using to do this. (Er, it was five stages, but I updated this on 23rd August 2006 to make it more streamlined!): 1. Check how much they owe you Firstly, work out what you're owed. I got this information by looking at my statements online, but you might use paper statements. If you don't have all of them, write to your provider quoting your account number and asking: Please send me a comprehensive list of all the charges that you have made to my account in the past six years, showing the date and amount of each charge, and a description of what it was for. I make this request using my rights under the Data Protection Act and expect your response within 40 days. You may want to call them a few days later to ensure they've received the letter. Make a note of the name of the person you speak to, as well as the time and date. 2. Ask for your money back When you have details of the charges, give them a call. Tell them that you did not give them permission to take the charges and that they are unlawful, then ask for a refund. This sometimes works, particularly for smaller amounts. Failing this, you need to write to them to request that they pay you back. My lawyer (OK, she's my mother, but she's a darn good solicitor too!) advised me that when you write to banks it carries a lot more weight if you show them in no uncertain terms that you know what the law is and where your authority for making a claim comes from. To that end, I'm going to use this letter, adapted from the successful one used by the Consumer Action Group: --- Dear Sir/Madam Account no: (your account number) Over the past six years, you have charged me for (enter what they have charged you for, e.g. exceeding your credit limit). It has come to my attention that this is unlawful at common law, and under statute and recent consumer regulations. In the terms of the contract which you agreed to at the time that I opened my account, it is implied that you will conduct yourselves in a manner which complies with UK law. Unless you can prove that they merely cover your administrative costs, I require full repayment of these charges, which I calculate at £xxxx plus interest of £xxxx. The total is xxxx. I also ask you to remove any default notices on my credit record that are related to these charges. A correction or amendment to the entries is not acceptable. If you do not comply fully within 14 days, I shall begin a claim against you for the full amount, plus interest and costs, plus I shall submit a complaint to the Information Commissioner. Yours faithfully Xxxx --- (I updated the above letter on the 1st September based on feedback and to streamline it further.) The reason why you ask for default notices to be removed is if you defaulted on a charge. It's not fair that your credit record looks bad because of an unfair charge. If you're sure this hasn't happened to you, you can of course remove all the text in italics. If you include the text in italics, make sure you de-italicise it first! Again, I'd follow up this letter with a call a few days later. If my bank doesn't respond in two weeks I'm going to give them a call. They may offer a full refund, which would be fantastic. If they offer a partial refund, I'll tell them it's not acceptable and write another letter telling them so. If the bank tells me that they'll get back to me later, I'll write to them saying that I'll allow them just 14 more days before I take them to court. If the bank tells me the charges are not unlawful, I'll ignore their bluff and stick to my guns. So far, the banks have paid out in full before going to court in almost every single case, so clearly they know they're wrong. 3. Send a 'Letter Before Action' If they still haven't settled, you need to write a final letter, which we're calling a 'Letter Before Action', warning them that you will be taking them to court. You can see an example letter in the article My Claim For Unlawful Bank Charges. (I updated this section on the 23rd August. I removed the suggestion that you send a court form direct to the company in order to show you're serious, because it takes more time than it's worth!)4. Take court action If they still don't pay up, I'll issue court proceedings. This sounds scary, but it probably won't even get as far as court anyway. My experience of small claims (claims of less than £5,000) is that big businesses that are in the wrong will often let it get right to the point where court proceedings are imminent, then they'll settle. You don't need a solicitor at the hearing if the claim is less than £5,000, as it's all rather informal. It'll cost around £130, which I can add to my claim. If I lose (and I'd be very surprised if I did), I won't have to pay the banks costs unless they can show that I've acted unreasonably. Which I won't. If my claim was for more than £5,000, I'd get a solicitor before proceeding. Good ol' mum! (Update on 12 February 2007: I won this case in November 2006 after issuing court proceedings. Read how in The Ultimate Guide.) Next article: Reclaim Even More Bank And Card Charges. Read: The Ultimate Guide To Reclaiming Bank And Card Charges. > For more guidance on claiming, see HM Courts Service and Consumer Action Group. > Vote with your feet and switch current accounts, savings accounts and credit cards.