Over £480m of bank charges could still be reclaimed by those in hardship.

Despite the banks' shock High Court victory last November, charges reclaiming could still be possible for over half a million people in financial difficulty, with thousands already reclaimed since the judgment (see the Bank Charges Reclaiming guide).

Those not in hardship can gamble on court action, though this is risky. Today, MoneySavingExpert.com is publishing a new bank charges reclaiming guide with new legal arguments for those who take the court route (see the new Bank Charges Court guide).

The £480m figure, derived from research by MSE (see breakdown below), is far less than the nearly £10 billion thought likely before the shock Supreme Court ruling on a technicality last year that derailed the Office of Fair Trading's test case against current account providers (see the Banks win charges case MSE News story).

However, it would substantially add to the £1 billion already reclaimed before the July 2007 hold on claims, pending the test case result, and change the lives of those in hardship.

Martin Lewis, MoneySavingExpert.com creator, says: "Rumours of the death of bank charges reclaiming have been greatly exaggerated.

"Certainly, the number of people who can do it has decreased. It's now mainly for those suffering financial hardship. But with current economic conditions, that is sadly still a huge number.

"We're already hearing good numbers of successful reclaims since the court decision."

Hardship successes

Thousands have already been reclaimed since the Supreme Court decision.

Examples from the MoneySavingExpert.com Forum include gingerUK, who said in December: "I got a letter from Abbey dated 3 December 2009 saying it has looked at my claim and taken into account my hardship, and as a gesture of goodwill will be refunding overdraft charges of £1,270."

Another, annieredhead, also said in December: "I received two letters today, one offering me £3,006 and one offering £249, for my two accounts. I can hardly believe it and am still shaking. Needless to say I will accept and should have the money in my account next week."

The Financial Ombudsman Services, which handles complaints between banks and consumers, says those in hardship can have their claim heard but there is no guarantee of success.

The court route

The more risky option, for those not in hardship is via the courts.

Martin explains: "The £35-a-pop charges for going beyond authorised overdraft limits, bouncing cheques or direct debits, are unfair. They're designed to entrap and stack charges on charges, leaving banks raking in profits.

"This isn't just my view; the OFT provisionally said it thought they were unfair too. The problem is finding a law where fairness matters.

"The OFT tried in a test case, beating the banks in the High Court, then the Court of Appeal, but not at the Supreme Court where it lost on a niche, technical decision.

"These charges didn't need be fair, at least under that specific law. To try and take things further we engaged a top banking QC to examine new legal arguments, and having looked at that and other sources we're publishing new guidance today though we need to urge caution that these are as yet untried.

"Far better is for people to go to the free Ombudsman service.

"While the test case focused on the Unfair Terms of Consumer Contracts Regulations, it may be possible to argue fairness under a totally different law called the Consumer Credit Act.

"It states the relationship between lenders and consumers must be fair, and better still, it's for the bank to prove it is, rather than the consumer proving it's not.

"Already, one court in Scotland has accepted amendments to the earlier template letters based on this argument."

Where the £480m figure comes from

Those in hardship have been charged around £1.6 billion over the past six years, according to Financial Services Authority and OFT figures. Half of those in difficulty get money back who try, according to Ombudsman, with the average payout around 60% of their claim.

This leaves around £480 million to claim back.

Quick bank charges reclaiming guide

There are two ways to reclaim if rejected by your bank/building society: either via the Financial Ombudsman or the courts

The Ombudsman

The best & risk-free way to reclaim. The independent Financial Ombudsman is the free arbiter of financial disputes.

Don't think judges and wigs, you just need fill in a form. The worst that can happen is it rejects your case – costs CAN'T be awarded against you.

Yet the Ombudsman has said it will only look at specific types of cases: where people are either in financial hardship, charges are disproportionate such as a £35 charge for going £1 overdrawn or if your charges have snowballed (and you're trapped by charges on top of charges).

If those apply, you must first put the complaint to your bank, which will in all likelihood reject it, then take it to the Ombudsman.

Once there, it's said it doesn't want legal arguments, just tell it your story about how the charges caused or worsened your financial situation and it'll try to sort it.

Success reports are coming in using this technique, but it's by no means guaranteed to work. Plan your finances assuming you won't get the cash back, but cross your fingers you do (see the Bank Charges Reclaiming guide, which includes free template letters and detailed guidance).

The Courts

The alternative, riskier route is to take the bank or building society to court. If you don't fit the Ombudsman criteria, or your case is one of nearly 30,000 already on hold at the court, you need to consider the judicial route (see the new Bank Charges Court guide).

Yet going to court is likely to be tough. You'll need to understand new and untested complex legal arguments and could mean a scrap with bank barristers.

Success is far from guaranteed, and if you do lose, you don't get your £25-£400 court fee back.

In extreme examples outside small claims courts, there's a risk of paying banks' costs.

Therefore, people need to consider the gamble very carefully before going this route.

Further reading/Key Links

Reclaim: Bank Charges Reclaiming, Bank Charges Court guide