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Your Money > Banking Articles > Three steps to...
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By Sarah Modlock At this time of year when many people are under more financial pressure than usual, it seems fitting to look at a way to recoup some lost cash. It probably comes as no surprise to hear that banks are using the fees and charges they place on our accounts The latest research shows that banks rake in some £4.6billion a year from current account charges, more than £3.5billion of which appears to be pure profit. An investigation by BBC2's Money Programme calculated that the real cost of automatically bouncing a direct debit and writing a computer generated warning letter works out at £2.50. Bouncing a cheque costs only around £4.50. Yet banks routinely hit customers with charges of £30 and more. This equates to a mark-up of more than 1,000% in many cases. The estimates were put together by a panel of two top business academics and a former senior executive at NatWest. Banks are not allowed to profit from such charges - they are only supposed to recover the costs of dealing with the problem. The BBC's work has led to renewed calls for customers to take legal action to reclaim unfair charges. 'Everyone who has had an unfair penalty charge in the last six years should be asking for their money back.,' says Martin Lewis, creator of the website MoneySavingExpert.com. His site has been offering a template letter which people can use to start the process and an incredible 180,000 have been downloaded in the past few weeks. Get your money back Consumer campaigners Which? said 120,000 people were preparing to pursue their banks through the courts to claim back the charges, which are believed to fall foul of consumer law. Banks stand to lose nearly £6billion if all those who have been penalised reclaim their losses for the past six years. 'The sheer number of people who are preparing to take action against unfair bank charges shows that the banks can't ignore this issue for much longer,' says Doug Taylor of Which?. The organisation says two-thirds of customers who complained about unauthorised overdraft charges in 2004 received a full or partial refund. Banks have already returned hundreds of thousands to customers who have threatened to take action in the county courts. So far no bank has defended its charges in court, resulting in thousands of pounds of payouts to the customers for their charges, lost interest and court costs. But so far, customers who have taken out court orders against their bank to reclaim charges have had to play a game of nerves. The bank will often leave it until the 11th hour before backing down and paying up. However, if cases like this were to reach a higher court then a precedent would be set that banks and consumers would have to follow. There is likely be pressure on banks to cut their fees in the spring, when the Office of Fair Trading will publish the results of a probe into punitive overdraft charges. It has already ruled that credit-card penalties averaging £25 are unlawful and that the maximum should be £12. In the meantime, consumers are urged to challenge their banks via the Financial Ombudsman Service (FOS), which is free, or through the courts, where you will have to pay a fee. Three steps to reclaiming fees from your bank Step one - Do the paperwork Check your bank statements and highlight all charges that could be considered excessive. You can attempt to reclaim any excessive fees or charges over the last six years. If you do not have statements going back that far then write to the bank requesting a comprehensive list of all charges showing what the offence was, the date and the amount. Alternatively ask for a copy of your statements. By law the bank must provide this information within 40 working days. Step two - ask for your money back Use a template letter such as the one on MoneySavingExpert.com and make sure you keep a copy. If you do not get a response within a few days then call your branch to ensure it has been received. Make a note of the name of the person you speak to. The bank should send you a reply within two weeks. If it doesn't, write again and make a phone call straight away. If the bank contacts you to say it will respond 'in due course' or offers a partial refund and you want to decline then write back stating that a set two-week period has already passed and if you do not hear a definitive answer within a further 14 days you will take court action. Bank Action says in half of cases the bank will bluff and write back claiming the charges are not unlawful. Of course, you may get lucky and find that they respond with a cheque. Step three - further action If you get no joy then it's time to get tough. If the bank refuses to refund the excessive charges or fails to resolve your original complaint within eight weeks, you can take your complaint to the Financial Ombudsman Service. You can get an FOS complaint form by downloading one from financial-ombudsman.org.uk and returning it by post. Outline your complaint and the actions you have taken. Explain that you believe the charges do not represent the cost incurred by the bank. Alternatively, contact the FOS by phone: 0845 080 1800, email: complaint.info financial-ombudsman.org.uk, or write to: Financial Ombudsman Service, South Quay Plaza, 183 Marsh Wall, London E14 9SR. Alternatively, you can take your case to the small claims court, providing the claim you are making is for less than £5,000. This process will involve some costs. See hmcourts-service.gov.uk for details. You can find tips from other customers who have complained about bank charges at independent pressure groups such as bankchargeshell.co.uk and bankactiongroup.co.uk. And finally... Good luck. Once this is all sorted out, the best way to a repeat of this problem is to keep to authorised overdrafts, stay on top of your balance and not provide banks with an opportunity to rip you off. As this is my last column for the year, may I wish you all a happy and prosperous 2007. |
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