The Office of Fair Trading (OFT) has said that companies may only fine their customers for breaching limits in proportion to the actual admin costs involved in chasing up payment.
This has forced the credit card companies to reduce their penalty charges from around £30 to around £12, typically. The banks have not yet followed suit and are still levying charges of £25 or more for breaching overdraft limits – despite the fact that the OFT has effectively said that their high charges are illegal.
What you can claim backConsumers are now demanding their money back in their droves. You can claim for up to six years of penalty charges. Some people have fought and won thousands of pounds in refunded fees. You are also entitled to interest of 8% on the amount you claim back.
If banks fail to refund charges for the last six years you can take them to the small claims court (if you are claiming less than £5,000). Most banks do not turn up to defend themselves in court – they claim it is too expensive to do so. But it could just be that they know they will lose and having a decision go against them would lead to thousands more claims.
Either way, if you feel that you have a legitimate claim then ask your bank for a list of the charges you have paid over the last six years – they are obliged to give it to you under the data protection act. If the bank refuses or doesn’t respond within 40 days then you can report them to the
Information Commissioner.
What to do if the bank won’t payOnce you have done your sums write to the bank explaining that you believe the charges you have paid are disproportionate and unlawful and that you want the money back – with or without interest.
If the bank refuses to reply or pay up then write back and tell them you are going to take court action and give them a deadline for paying up. If they don’t meet the deadline and you want to continue then start the legal process off.
The good news is that you can do this online. Her Majesty’s Courts Service (HMCS) has a website called
Moneyclaim which you can use to start your claim against the bank. You will have to pay a small fee based on the size of your claim which will be refunded if you win.
Speed is of the essenceOnce your claim has been initiated (five days after submission) the bank must respond to the action o lodge a defence within 14 days. If they do not you can ask for a judgement to be made against them for the full amount of the claim without a hearing. Try and do this as quickly as possible after the 14-day period has elapsed through the
Moneyclaim website.
There are various outcomes possible here:
1. The bank pays up in full. You win.
2. The bank doesn’t acknowledge the case within 14 days -you claim a judgement.You win.
3. The bank acknowledges the case but fails to lodge a defence within a further 14 days. You win.
4. The bank fights the case. This is unlikely but possible. You will need to fill in a Court Allocation form. Check out the various consumer help sites dedicated to this subject for extra help e.g.
Consumer Action.
What to do if you win and the bank won’t payWell, you can simply send in the bailiffs! That’s right. You can send the bailiffs into the bank to reclaim the money. Take any further problems up with the
Financial Ombudsman.
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Compare Mini cash ISAs and get the best tax-free savings ratesNB: This situation is evolving. As more consumers claim charges and the total costs to the banks mount up eventually a bank or all of them may welldecide to fight these claims. Also bear in mind that banks may react to any claim by closing your account or asking you to repay your overdraft immediately. You can try to fight this through the Financial Ombudsman but it is worth setting up a new bank account before taking the banks on in court - just in case.
