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How To Reclaim Unfair Bank Charges
 The history of bank charge reclaiming What happens next? If the banks lose money, who pays? Is reclaiming charges self-defeating? Related Articles/Discuss |
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The history of bank charge reclaiming
The move to reclaim bank charges is a real grass roots consumer revolution. A few brave souls decided to challenge their bank and started to get settlements in 2005; by early 2006 there were reports of cases in this site's Chat Forum.
The potential was huge, so I asked Dave Smith, who had already grouped together with a few other successful claimants to start a small website the ConsumerActionGroup, to write a summary of how to go about it, which I soon published as part of a main article on the site (the predecessor to the full article you've just read).
Since that point, more and more people have started to reclaim and many websites have sprouted up. The campaign has become more mainstream recently with Which? and others joining in. Big media started to cover the story; I've personally presented an ITV1 Tonight with Trevor MacDonald on the subject and discussed it in depth on GMTV and Radio 2 amongst others.
Yet the real credit for all this goes to the originators like Dave, who paved the way for this mass action. It's truly inspiring that a small group of people prepared to stand up for themselves can create such a stir.
What happens next?
Currently banks simply haven't contested cases as settling is cheaper; they prefer to try and quietly shove the whole issue under a rather large carpet. However, as the number of people reclaiming increases through the huge publicity it's now attracting, at some point it will become worthwhile for the banks to fight back.
At that point I suspect we'll see this fought out in a higher court which can set a precedent – probably with one huge class action. My hope is if that happens, the banks will lose, but you can never be sure with the law.
If the banks lose money, who pays?
Many of the major credit card companies have already dropped their charges from £30 to £12 on the back of the Office of Fair Trading's ruling that charges were too high. This may happen with unauthorised overdraft and other charges too.
So who'll pay?
I often state a bank's job is to screw us for cash and our job is to try and stop them. So while we escape high charges one way, they will undoubtedly find a system to add them another way.
This is why when the OFT first noted that it wanted credit card companies to reduce their charges to £12 from £30, as my phone rang off the hook with calls to do interviews, people were surprised I didn't welcome the move with totally open arms. Instead I answered, “the worry is while the charges will be dropped, instead of a penalty charge, now card companies will simply say, “you lose your 0% or other special offer' and that costs a lot more than the penalty charge”. In fact we've already seen that happening with credit card companies such as MBNA.
This is likely elsewhere too – the rate at which unauthorised overdrafts are charged is likely to increase if charges are lowered, credit card annual fees may be reintroduced for some customers, and a set monthly fee for overdrafts over the interest rate could be reintroduced.
Is reclaiming charges self-defeating?
Absolutely not! Here we have a true consumer victory over the banks. And people can reclaim six years' worth of fines back, which is likely to come out of banks profits. Thus retrospectively consumers will have the upper hand and banks will sport a moral and financial bloody nose, though in the long run, the balance will probably be restored.
Elsewhere, hopefully more people will learn to understand the fact we live in an adversarial consumer society as this philosophy provides us with true protection. We must all learn to behave defensively with our banks, understanding how and when charges operate and modify our behaviour to deal with them.
It's worth examining how this will impact different people. Forgive my broad brush strokes, but let's separate it into two stark groups.
- The affluent financially savvy. When writing about this some have said “I'm always in credit, never overdrawn, all these people reclaiming money will mean I have to pay more charges.” Actually I think this is baloney. Most of the new charges are still likely to be for customers who fall foul of conditions.
The banks are hugely keen to obtain the credit-worthy as customers, so it's unlikely they will start to charge for in-credit banking facilities – currently things are just too competitive. - The overdrawn and struggling. Here defensive behaviour is important. Ensure you are with the best account, with the cheapest interest rates, which will help you keep within limits (see the Banking And Loans, or Credit Cards sections for more details).
Set up direct debits to pay off your credit cards, making at least the minimum repayment, but paying more on top if you can (see Danger: Minimum Repayments). Monitor your bank account carefully so you're not going overdrawn and do a strict budget to ensure you've enough cash to meet what is happening (see the Budgeting article). And of course MoneySave right across the board to cut your bills without cutting back.
Of course there are still people who will get bank charges even if they behave perfectly, as illustrated by one of the people I interviewed for Tonight With Trevor McDonald (though the producers ran out of time to include her story in the final cut, see Blog for details).
Here we can but hope that the lack of bank charges will help the snowball impact disappear, though increased overdraft rates may do this too. Sometimes you just can't win.
HAVE YOU READ?
How To Reclaim Unfair Bank Charges
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