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Can you still reclaim bank charges?

A Supreme Court ruling in November 2009 dealt a blow for many people trying to reclaim unfair bank charges, yet many can still get years of charges adding up to thousands back, joining over £1 Billion already repaid.

You can only reclaim charges going back six years, so if you are thinking of claiming them back, act quickly!

On 25 November 2009 the Supreme Court handed down its judgment in the bank charges test case. The banks had appealed a Court of Appeal decision (made in February 2009) that their unauthorised overdraft charging terms were subject to the test of fairness in the Unfair Terms in Consumer Contract Regulations.

What did the judgment say?  The Supreme Court has decided that the bank's unauthorised overdraft charging terms are not fully assessable for fairness under the Regulations.  This means that the terms cannot be assessed on whether the banks are giving fair value for money.

If you have recently had a one-off bank charge or just a few charges going back over the last six years, then we recommend that you contact your bank directly and ask them to refund the charge into your account.  The information on this page is for those who have been penalised with a larger number of charges over a longer period - especially those in financial hardship or who’ve had charges on charges.

To fulfill the financial hardship criteria, you need to fulfill the Financial Services Authority’s official definition:

“A complainant is considered to be in financial difficulty when his or her income is insufficient to cover reasonable living expenses and meet financial commitments as they become due.”

This means when you are struggling to pay your utility bills, rent, council tax, or repay your mortgage, credit cards or loans.

>>> Bank Charge Reclaim Pack

There’s no guarantee of winning, yet for some (primarily those in financial hardship), there’s still a risk-free, cost-free process which could result in charges being refunded. 

Some people do find battling their bank stressful though, so if you would prefer us to act on your behalf, please visit the  bank charge reclaim service page to learn more about how we might be able to help you.

Bear in mind that reclaiming bank charges is not a black and white process and is much about negotiation as anything else.  You want your money back, the bank doesn't want to give it to you - but the bank is obliged to treat customers fairly and stay within the law.

If a bank believes your complaint may be investigated by the Financial Ombudsman or even taken to court, it may offer a partial or even full settlement when you just write it a letter or two. If it ends up paying out, it’s better to do it sooner, and offer a bit less, rather than incur the expense of fighting.

Therefore acting confidently and pressing your case if you think you’ve had unfair charges is crucial. If you have a strong case you could get some of your money back after one or two well-written letters.

It is of course your decision of whether to accept an offer that is made by a bank and bear in mind that there are no guarantees (and it's not as easy as it used to be) - so if you are offered a reasonable settlement, consider taking it.

The Bank Charge Reclaim Process

• Organise your bank statements going back over the last six years.  If you do online banking, go to the statements section and print them off.  If you do not do online banking or can't access statements going back six years for the account in question, you will need to write to your bank and ask for a list of transactions going back six years.  Please note that under the Data Protection Act, there is a £10 fee for this.  Send a cheque for £10 along with bank statement request letter
• Highlight the charges on your statements that you would like to reclaim back and add them up to give you a total claim amount
• Complete a financial hardship letter and sign it
• Complete the income & expenditure sheet to back up your financial hardship letter
• Write a letter asking for your charges back (you need to decide whether you're going to take the legal argument or the 'human' argument).  There are a number of different letters we have available depending on what approach you want to take and these are available in the Bank Charge Reclaim Pack

What's Next?

If you have requested the list of transaction going back six years from your bank, then they must respond within 40 days - by law.  If they make any find of excuse, then follow up with a phone call and then report it to the Information Commissioner for a breach.  You will then need to follow the steps above and send in the appropriate letters.

There's a saying that if you're forewarned, you're forearmed.  Don't expect your bank to refund all the charges back to you without any resistance.  They probably won't.  When your bank receives your letter of complaint, there are a number of possible responses:

• You’re offered a full refund.  There is a small chance your bank will offer you a full refund as a ‘goodwill payment’. It’s more likely if you have a small claim
• You’re offered a partial refund. You may be offered a partial refund as a ‘goodwill gesture’. If you don’t think it’s enough, call up and ask for what you feel is appropriate – remember this is a negotiation.  Remember banks have to balance the administration cost of continuing versus clearing this off their books and you need to bear in mind the additional hassle and risk of continuing versus getting some cash now
• It offers a refund but says it should pay off your debt.  You may be offered a refund but told it must be used to pay off any debts you currently have at the bank (overdrafts or credit cards). The Ombudsman has said this is generally acceptable as it is returning you to the position you would be in without charges (and is still a win after all)
• The bank asks you to fill in a financial statement form.  If you’ve told the bank you’re experiencing financial difficulties and it’s unsure you fulfill the hardship criteria, or even just to deliberately delay, it may send you a financial statement form, or something similar to complete.
  
  Fill this in and send back as soon as possible. Do re-include your original letter, adding a line that you’ve enclosed the info as requested – this emphasises that you’re serious and confirms exactly what you’re asking for
• It offers to help but not to refund any charges. Even if the bank has accepted your word that you’re in financial difficulties or does after you’ve sent in the financial statement form, this doesn’t mean it has to give you your money back, just that it has to treat you sympathetically.
  
  It could try and help in other ways, such as not imposing any further charges, stopping any debt enforcement action against you or putting you into a payment plan to manage any debts you have with it. If you’re not happy with the offer, see below
• The bank rejects your claim.  This is the most likely outcome.  By auto-rejecting even people with good claims, the banks succeed in stopping many people either going on to the Ombudsman or taking their claim to court or (see below for details on what each means), as people give up, and that’s the whole point. Yet whatever it says don’t give up. Call up or write another letter to show you’re not going to give up easily. This could persuade it to settle.
  
  If your first letter doesn’t work, before going further you may want to give the bank a call, or write another letter saying you’re going to the Ombudsman (or court) and you think your case is strong, but would prefer to sort it out quickly. See how that works and carry on if it doesn’t.

If your bank doesn't offer a satisfactory response

If you bank rejects your request (the most likely response) or you receive an offer which is not to your satisfaction, then you have two options:

1. Take your complaint to the Financial Ombudsman.  This is option to go for if you have decided on a 'human' argument i.e. how the charges have negatively affected your financial situation. The Ombudsman has is unlikely to consider ‘template legal arguments’.
   
   As it’s free and there's no negatives apart from a few months wait, even if it rejects your complaint, it's worth doing. It’s not guaranteed to get you a payout but the chances are greatly increased if you are in financial hardship. The worst that can happen is you lose the cost of a few stamps. The next step will take you through it
2. Take your bank to court.  To use the arguments charges are ‘legally unfair’ involves starting or continuing a court claim.  This is something that should not be undertaken lightly, you will need to do work and research and be prepared to turn up in court to argue this. The arguments are complex and untested and it won’t be easy to do.  See our Bank Charge Reclaim Pack for more information

Complaining to the Financial Ombudsman Service

The Ombudsman's job is to settle disputes. If it accepts your complaint, it first goes to the bank and asks it about the situation. If the bank doesn’t agree to pay you, the Ombudsman may carry out a formal investigation, though it’s more common that a settlement is reached without a formal investigation and adjudication.

You can’t simply go direct to the Ombudsman though, you must always complain directly to the bank first. Then you need wait eight weeks from the date you sent your initial letter to the bank demanding money – however if you’ve received a rejection or final response from it, you can go sooner. Don’t expect an instant decision though – it can take weeks or months.

You can contact the Financial Ombudsman in two ways:

• Phone - just call 0207 964 0500
  Internet - just go to the FOS website, where there is a Microsoft Word version or PDF version

You will need to fill in and post back a copy of the form to explain your case and don't forget to sign the letter. You should also send copies of any previous correspondence you've had with your bank.

Honestly state what’s happened to you; the Ombudsman has specifically said it is not interested in template letter type applications. It wants to hear the affect of bank charges on you from a human perspective – so make it as personal and specific as you can (stick to the facts and the impact).

You can also ask for interest to be added to your claim (e.g. the 8% you’d get if you were going to court or the actual interest you were charged by your bank of around 20%). After all, if you don’t ask, you don’t get.

For guidance letters, see our Bank Charge Reclaim Pack.

The FOS will then send you a confirmation letter that it will look into your case and get back to you if it needs any more information, but otherwise you can then leave the matter to it to resolve and it'll contact you with any offers from your bank.

If it decides in your favour its aim will be to put you back in the position you would have been in had you not been treated unfairly. This does not necessarily mean a refund of charges; it may think an alternative solution is more suitable.

Be aware that most cases take on average between 6 - 9 months and it is currently receiving a record number of complaints from consumers and the complaints are getting more complex, so expect a wait of up to 12 months or even longer.

If you lose your case with the Ombudsman

The only option now available is to go to court and that is likely to be difficult, though if you’re willing to persevere and can get a grip on the law it is do-able.

There are risks involved in this, it will almost certainly involve paying a fee and also has a small risk of having costs awarded against you. For detail on what it involves read the 'Read Me' guide of the Bank Charge Reclaim Pack.

Useful Links

>>> Financial claims forum
>>> Financial claims blog
>>> Claims Questions & Answers
>>> Bank charge reclaim service
>>> Reclaiming unfair credit card charges
>>> Debt help & advice

While every effort’s been made to ensure the information on this page is accurate, it doesn’t constitute legal advice tailored to your individual circumstances. If you act on it, you acknowledge that you do so at your own risk. We can’t assume responsibility and don’t accept liability for any damage or loss which may arise as a result of your reliance upon it.