Rumours of bank charges reclaiming's death have been exaggerated. A shock Supreme Court ruling in Nov ’09 did deal a huge blow, yet some can still get years of charges adding up to £1,000s back, joining the £1bn already repaid.
This is a step by step guide to reclaiming the unfair £35 a pop charges for breaching overdrafts, it’ll show you who can reclaim & how to do it; including free sample letters.
Other Reclaiming Guides: Credit Card Reclaiming, Mortgage Fees, PPI, Council Tax, Endowments
While every effort’s been made to ensure this article’s accuracy, 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.
Bank Charges: Key Info
Reclaiming bank charges from current or closed accounts specifically for busting your overdraft limit, bounced cheques and direct debits was once an open door.
You simply threatened to take a bank to court or the Ombudsman and it sent you back a goodwill cheque for six years’ worth of charges plus interest – yet since the result of the widely publicised shock Nov ’09 Supreme Court ruling on the Bank Charges test case it’s got more difficult. Read about why
Bank Charges Reclaiming – why it’s got more difficult
We believe bank charges of around £35 a pop for going beyond your overdraft, bouncing a cheque or direct debit are unfair, so you should be able to claim back the money you paid out over the last six years or more – often adding up to thousands.
In 2007, after banks had already repaid roughly £1 billion (with six million letters downloaded from this site alone), they finally agreed to go to court in a test case against the Office of Fair Trading (OFT).
The case looked at whether, under a specific European regulation, it was possible for bank charges to be legally unfair. If so it'd then have been the OFT's job to decide if they actually were unfair - and provisionally it said they were.
The banks lost in the High Court and then in the Court of Appeal, showing there was real strength in the argument. Yet in the type of turnaround that can only happen in the law, with a shock decision in November 2009, the new Supreme Court overturned this on a technicality and it was decided that 'fairness rules' didn't apply (see Shock Bank Charges Loss news archive).
Then worse was to come, the following month the OFT decided it wasn't going to fight on; having looked at its options it decided it did not think it appropriate to continue (see OFT gives up the fight news story).
If you’re reading this after a one-off recent bank charge, just call up the bank and see if it’ll wipe it. This guide is aimed and those who’ve had a number of charges over a longer period. For many people, especially those in hardship or who’ve had charges on charges, payouts could still be possible, and done right it’s free and risk-free.
Some inspiration before you begin
Even after the Supreme Court judgement we’ve continued to receive reports from MoneySavers saying they’re getting their money back... here are just a couple of examples:
Halifax paid £2,400 (I asked for £5,000) into my account last night. Since I complained customer services have been excellent in helping me. I first phoned them at beginning of Nov 09 and I thought that after the court case they wouldn't help anymore, but they just continued as normal." Dec 09
I wrote a letter to Natwest claiming hardship in Sep 09, they quickly sent a reply asking me to fill out a financial form. I filled it in and returned it and after 2 weeks they sent me a letter saying I had undervalued my income and they didn’t think I fell under the hardship category.
I then sent them a stern letter with more evidence of hardship and threatening to go to the Ombudsman. About 2 weeks later the Supreme Court ruling occurred, and I thought that was it to be honest but I got a letter last week saying they are offering me the full amount of £1,800.” Dec 09
Report your own successes and failures in the forum
How easy will claiming be?
There’s no guarantee of winning, yet for some, primarily those in hardship, there’s still a risk-free, cost-free process which could see money coming back.
The independent Financial Ombudsman Service has said it will look at certain cases (see the step by step process below), and there’s no risk in doing so. Yet even so...
"The safest thing to do is plan your finances on the fact you WON’T get a payout, but cross your fingers in the hope you will"
Some do find battling their bank stressful though, so go in with a positive mind, and even if you don’t get a refund don’t be let down.
And do remember the best way to avoid bank charges is not to have them in the first place – for help avoiding them see the Bank Charges Compared guide.
Already tried to reclaim?
You may have already started a reclaim, and if so the tactics depend on where you got to. If you submitted your reclaim before the Supreme Court result (Nov 09) things will have changed a lot.
Our aim is to present you with options and information about how to help yourself proceed – though do remember it’s not specific legal advice. To get you started pick the relevant section below…
Get started here
Never reclaimed before?
Jump to the Step by step reclaiming guide below.
Already sent a letter to the bank?
Read the Amending your bank claim note.
If your complaint is on hold with your bank and it hasn’t already contacted you it should soon, giving you eight weeks to respond. If yours hasn’t contacted you yet you can get the ball rolling yourself or wait until it does.
If you’ve already informed the bank you are in financial hardship and it’s still turned down your complaint, as long as it’s been over eight weeks you can take your complaint straight to the Financial Ombudsman. Tell your bank you’re doing this or it will close your complaint.
Carry on reading the info and guidance for new reclaimers below to see which new approach you want to take but skip Step 2 if you've already done it.
Claim on hold at the Ombudsman?
Read the Amending your FOS claim note.
If your complaint is on hold at the Ombudsman and it hasn’t already contacted you, it should soon.
It’s informed us it is likely to reject existing 'template' complaints unless there are one off circumstances that apply.
If it thinks you do not meet its criteria it'll write a letter to say your case has been closed, however….
While the letter won’t say so – you can still go back to the Ombudsman with new arguments even if it says the case is closed
This may be relevant if you’re in financial hardship and your original bank charges reclaim didn’t note that (or you are now in hardship and you weren’t then).
The best thing to do is redraft your claim based on the ‘human’ angle – carry on reading the info and guidance for new reclaimers about the Ombudsman below – but use the letters that ask to amend your claim.
Claim on hold in court?
Read the Amending your court claim note.
The process is quite different, and more complicated, which is why our preference (apart from in the very early days) was the Ombudsman route. However, we are working as quickly as possible on a separate guide which we aim to launch by mid-Feb at the latest (the link will be added here), ensure you’re getting the weekly email where all updates will be included.
In the meantime if you receive a letter from the court, or your bank, to ask for your case to be dismissed, and you don't know what to do, go to the Bank Charges forum where other MoneySavers will try and help you.
Step-by-step reclaiming guide
This is a new version of the guide, please help by feeding back, suggesting any changes, or ask questions on areas we may’ve missed, in the bank charges feedback discussion.
Reclaiming bank charges is an art not a science. In many ways this guide is about negotiation. It's designed to try and get back the money we believe has been unfairly taken off you as quickly and swiftly as possible. It’s important to remember the basics though...
You want your money back, the bank doesn’t want to give it you. Yet it’s obliged to treat customers fairly and stay within the law.
If the bank believes your complaint may be investigated by the Ombudsman or even taken to court, it may offer a partial or even full settlement when you just write it a letter or two. After all, if it ends up paying out, it’s better to do it sooner, and offer a bit less, rather than incur the expensive of it fighting.
Therefore acting confidently and pressing your case if you think you’ve had unfair charges is crucial. If you’ve a strong case you could get some of your money back after just a well written letter or two.
However of course, there are no guarantees - while in the early days of reclaiming banks never fought, and if you went all the way you got a full payout, that’s far less likely now – so if you are offered a settlement – think about taking it.
Bank charges reclaiming doesn’t happen in a day, it can take a few months for letters to go to and fro. Therefore use these two quick checks to keep this going...
Bookmark this page. This is the main bank charges page and we will update it with new info, respond to feedback and amend sample letters if needed. Please bookmark it.
Ensure you keep up to date. Bank charge reclaiming is fast moving, and there are constant developments which can completely change how it works. This guide’s based on our best current knowledge.
Please ensure you are getting the free weekly MoneySavingExpert e-mail which is how we’ll communicate any urgent updates. Fill in your email below and press enter to get it.
Step 1: The Ombudsman route - are you eligible?
Before you even start to reclaim, we need assume that your complaint to the bank itself will be rejected so you’ll need to take it further. You do that either via the Financial Ombudsman or the courts. It’s important to know from the beginning which route is your aim, to work out your approach.
The Financial Ombudsman Route
The Ombudsman is an independent service created by parliament to help settle disputes between financial companies and their customers. The worst thing that can happen is you wait a couple of months and get rejected (read more about it in the Financial Ombudsman guide).
It's free and virtually risk free, so if you have a chance of complaining there rather than court it’s much safer and more desirable. You don’t need to go in person, it’s just a matter of filling in forms.
The Ombudsman has said it is willing to look at specific types of bank charge reclaims (see below) primarily involving severe hardship.
The Court RouteIf you don’t fall in its parameters the other option is court, and that means the landscape is radically different.
Here you’ll need to apply to go to court, using good but untested arguments on complex areas of law. And while we will provide resources to help if you choose to do that, a simple template is unlikely to do it – you will need to adapt it for your banks specific terms.
If you’re reclaiming you’re already by definition financially struggling. If so, the gamble of paying a £50-£100 court fee and the (albeit small) risk of having costs awarded against you is a big ask, and one many should reject.
Yet that doesn’t mean you can’t simply complain to your bank, citing the fact you’re considering court action, and follow the process to begin with. The risks only start when you submit a court claim – so you could try up to that point then call it a day if need be.
Quite plainly the Ombudsman is the preferred route. If you can go that way, it’s a far safer option, although it doesn’t mean you’ll win, but means the risk of losing is less. So now to work out if the Ombudsman is for you…
Who can go to the Ombudsman?
The Ombudsman has said it doesn’t want legalese challenges; it will only look at cases based on the ‘human’ criteria – in other words if you have been harshly or unfairly treated. It specifically noted three different reasons which it would be likely to look at on this basis. So check whether you fit in one or more…
2. The charges are disproportionate
If you unintentionally slipped over your limit by a few pounds and the charge is a lot higher than the ‘offence’ eg you go £1 over but are charged £35.
The FOS stresses these cases are not "black and white" and those who continually slip over their limit, not in hardship, are not guaranteed to be successful.
3. You are / were stuck in a cycle of charges you cannot break out of
This is known as snowballing and effectively means you’ve had charges on charges, so you’ve been stuck in a trap of not being able to clear charges before new daily or monthly fees are added on top.
This is very common for those with larger reclaims, and is often the reason why some people are being paid back many £1,000s. Of course it tends to go hand in hand with being in hardship.
Which category do you fit?
After reading the list above, here's how to decide what's next:
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You're pretty sure you fit into these guidelines. If so follow the Ombudsman route laid out below.
You think you could fit into these guidelines. If it’s touch and go, then it’s worth trying this route as it’s safest and you’ve nothing to lose. You are still allowed to go to court if you lose at the Ombudsman – though you can’t go to the Ombudsman once you lose in court.
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You don’t fit into these guidelines. In this case your only option is to follow the court route, which as already explained is less certain and more difficult. As it will involve complex legal argument, we intend to publish a court guide in the next couple of weeks (a link will be added here), please ensure you get the free weekly email which will notify you when it’s ready.
Step 2: How much can you reclaim?
If you’re making a new claim, the first step is to find out how many charges you’ve had (and can therefore try and reclaim). If you’re restarting an old claim then jump to Step 3.
Here’s a quick ‘how much’ Q&A (click for the answers):
Q. What charges can I try to reclaim?
We’re talking specifically charges and related costs for going beyond your overdraft limit, or bounced cheques and direct debit. Traditionally these are about £35 per transaction.
Bank account monthly fees for packaged accounts are not part of this – and can’t be reclaimed (though they can be cancelled, see Best Bank Accounts guide. The rules are also totally different for credit cards, see the Credit Card Reclaiming guide. You may also want to see the Bank Charges Comparison tool to see how your bank’s charges compare.
Q. Can I try to reclaim if the account’s now closed?
There is nothing barring you from trying to reclaim charges if you’ve now closed the account, even if it was a few years ago.
Q. Can I reclaim from more than one bank?
Yes there’s nothing barring you trying that, this applies to any current account you've had.
Q. Can I try to reclaim new charges if I’ve been paid out before?
Q. How far back can I reclaim?
We’re certainly talking years not months, though there are varying views on how many. Don’t worry if you haven’t kept historic statements though, you’ve a legal right to access them (see below).
The Ombudsman suggests claiming as far back as you like, and it will decide whether or not all or part of your claim can be considered.
Yet if you end up in court, normally the Statute of Limitations Act says you can only claim for something within six years of the event in England, Wales and Northern Ireland, and five years in Scotland.
In many ways this six years is probably a good rule of thumb for putting in front of the Ombudsman, though if you had substantial charges before that there’s no harm including them.
Q. Can I charge interest on my bank charges?
If you got to court and won there, you’d be entitled to add 8% flat interest (not compounded) on top of compensation from the date of each charge. Therefore, you may want to ask for the interest as part of the initial claim.
Do understand you are NOT legally entitled to interest unless you win in court, yet if you do decide to push hard, do consider it part of the negotiation process. It may mean you could offer to settle “without interest”. Plus the Ombudsman’s view is it’ll consider interest if it’s asked for – so don’t ask don’t get.
Bank Charges Interest Calculator
For those who want to ask for interest, the calculator below will work it out for you. When you click ‘print’, a new window will pop up with a list of your charges. To save the list and avoid typing it in again, highlight the text in the window, then copy (Ctrl + C) it and paste into Word or similar programme.
Q. Can reclaiming hit my credit score?
No, it can’t hit your Credit Rating and won’t go on your credit file. Yet the bank you reclaim from can keep its own record, and it may choose not to deal with you in future. While in the early days banks closed the accounts of some reclaimers, the Ombudsman has ruled against that and the practice has largely stopped. Yet in case this is a problem there's a few precautions to be aware of:
- If you are making a hardship claim and are offered some kind of payment plan, ensure you check any effect the plan could have on your credit rating.
- There’s also a small chance you'll be moved to a basic account or be asked to return your cheque book and have other restrictions placed on your account. If this restricts your day to day finances it may be worth opening an alternative account. See Best Bank Accounts.
On rare occasions your account may be closed
When reclaiming first started, it was common for banks to close down customers’ accounts when they paid out. Yet after complaints, this has almost always stopped. The FSA now says: “A firm must not close accounts or threaten closure when it might reasonably appear that this is for the purpose of penalising customers that have complained about unauthorised overdraft charges.”
Yet, if you really want full belts and braces, it may be worth opening an alternative, or ‘parachute’, account with another provider before you start. See Best Bank Accounts
What should I do if I don’t have old statements?
Now, let’s be honest, how many people have years’ worth of statements? If you don’t have them, don’t worry, you’ve a legal right to force the bank to give you them, but before that there are a couple of things you can try…
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Do it online. If you use online banking check out what’s available there first.
Call or write to the bank. Some banks will send you the info if you phone to ask (we had feedback in the past that sometimes Barclays, Halifax and HBSC have done this) so try this first.
You can also send a letter to your bank requesting a comprehensive list of all past transactions, including charges, (and at this point you may as well try going back for the longest period possible).
Demand your past charges under the Data Protection Act
If the above doesn’t give you what you want, you’ve a legal right to demand the information under the Data Protection Act, though banks are legally allowed to charge up to £10 for it (and banks being banks, they usually charge the full amount)
To speed the process up you could insert a cheque for £10 as part of your initial request as banks may stall the process by later writing to ask for the money. Of course the counter is that it may send you the information without charge if you don’t include the tenner.
Yet there’s one crucial fact here…
Never ask for statements, specifically request a list of transactions
If you do ask for statements you may be charged £10 a time, and over six years that’s £720, yet asking for a list of charges should be fine.
Here’s a template to help (and MoneySavers in the forum have kindly compiled a bank addresses if you don’t know yours):
Banks only have 40 days to respond, regardless of any excuse. The result of the test case does not have a jot to do with this, it’s a different law, no matter what they say. If you get one, follow up with a phone call and then report it to the Information Commissioner for a breach.
When you receive your transaction list go through with a highlighter and find all the relevant charges. You should also be able to note what the charge was for and decide why you think it was unfair.
Step 3: Write asking for your money back
Whether your case has been on hold or it’s a new complaint, contact the bank and ask for your money back. There are two arguments why it should give you your money back, and you can use either or both:
The ‘Human’ Argument
This is the main argument to use if you fit in the Ombudsman criteria from Step 1. We call it the human argument as it’s not based on any law, but simply telling your story about how the charges have impacted you and caused or worsened your financial situation.
The ‘Legal’ Argument
After the Supreme Court decision, we hired a top banking QC (see MSE hires top QC archive news story) to suggest possible new grounds for reclaiming to us.
They were just thought papers, and at this stage are untried, so there’s no idea how successful they will be. Yet while the Ombudsman has said it WON’T look at them, you’ve nothing to lose including these concepts in your initial complaint to the banks (going to court is a different matter).
There are two arguments that can be used, the first uses a different part of the same regulations that the test case was argued under, the second is newer, and possibly provides a greater chance of success. Click the links to read more about them...
Regulation 5 of the Unfair Terms in Consumer Contracts Regulations (UTCCR)
Unfair Terms In Consumer Contracts Regulations 1999
In the Supreme Court ruling on the bank charges test case, the chief judge of the Supreme Court thought it important enough to say this ruling didn't stop people challenging fairness under 'Regulation 5' of the Unfair Terms in Consumer Contracts Regulations (which the Supreme Court case did not cover).
Here's what Regulation 5 actually says:
5. – (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
The test case ruled out the fact that the price of bank charges could be used to assess fairness under this regulation. In other words the old argument that ‘charges are levied at £35 but it only costs the banks £2' has gone.
Yet it may be possible to use other ideas to examine fairness, though chances of success on this argument may be weaker (more on that in a moment)...
Customers can't opt out
Bank accounts cannot be 'individually negotiated', you get what you're given. This also applies far more specifically to bank charges – there is no ability to opt out of having charges, eg, to have an account where there is no function to go beyond your overdraft limit. This is a significant imbalance between the parties.
Unfair cross subsidy
While it's accepted some cross subsidy is acceptable within business, here, the minority of customers are paying an excessive proportion of costs for the structure of banking. This creates a significant imbalance between the parties.
Effect on vulnerable consumers
It is arguable that banking is a public service or at least has a public service element, more people have bank accounts than telephones – and we are strongly encouraged by the government to use banking services. The workings of the original UTCCR directive mention this pubic service remit.
Yet this is a pubic service where there is a cross subsidy that has to be met by the most vulnerable, least affluent members of society.
Charges snare and are designed to multiply
The structure of £35 transaction bank charges are such that they effectively generate more charges – thereby trapping people in a charges spiral. In other words, you go beyond your limit, get a charge or charges, and then due to being unable to afford that charge, incur more.
Many people who've had small numbers of charges initially have seen them multiply into thousands and been unable to do anything to stop that process continuing.
Lack of competition
Until very recently (see Bank Charges Comparison), since the advent of the bank charges test case, no bank marketed its accounts based on the charges a customer could be expected to pay. There has never been any competition on this – there is no choice for consumers to go elsewhere for a different level of charges.
Incomprehensible nature
Consumers are not told clearly what the cost of their bank account will be in different situations and the interaction of those charges.
Understanding when and how much you will be charged is not transparent, and while the terms and conditions lay it out, the practical impact of this is not explained – some banks often have difficulty interpreting these rules themselves.
The name 'unauthorised' overdraft is a fallacy. Banks do permit people to take money beyond their overdraft limit (and it’s extremely profitable to them) and in fact have a second hidden ‘unpaid' limit beyond which they won't allow customers to take more money – though they still levy more charges.
Yet customers are not told when this will occur, or at what level their transactions will no longer be paid. Nor are they told the amount they can spend, nor given the ability to opt out of transactions once they know it will occur a charge – the information is only ever retrospective.
Money Management
The entire structure of charging people repeatedly when they have little money, runs counter to the ability to fairly manage a bank account. One true example of this unfairness is a woman who thought she had £50 left of her overdraft – yet unbeknown to her, and not indicated by the bank, that day a cheque from two months earlier had just been cashed putting her over the limit.
From memory, she then spent £40 in six different transactions (including a sub-£2 bag of carrots) and incurred £35 charge for each, a total of £210. Yet had she been told of the situation, she could've funded the account, or even chosen just to take out £40 in cash – leaving only one £35 charge.
The Chances of Success?
While these arguments certainly make sense, when the Office of Fair Trading looked at them, it didn’t believe they had a realistic chance of success, (see the OFT to drop bank charges MSE News Story or read the full OFT Personal Accounts decision – focus on pages 13 and 14).
However while that certainly is dissuasive, it isn’t definitive. After all in the original test case the OFT thought it would win, and already did at the High Court and Court of Appeal. The law is a strange beast and sadly can be inconsistent.
Yet none of that stops you using this argument combined with the ‘human’ element in your initial letters with the banks – the fact you may be willing to take court action is a good negotiating point. However it does mean you need to think very hard before taking it to court if you don’t get anywhere and can’t go to the Ombudsman.Section 140a of the Consumer Credit Act (CCA)
The Consumer Credit Act 1974
This is a piece of law that wasn't looked at in the test case, and it’s likely to be easier to argue (though still far from a guaranteed success)...
Section 140a of the Consumer Credit Act (CCA) says:
“The court may make an order … in connection with a credit agreement if it determines that the relationship between the creditor and the debtor … is unfair to the debtor... “
Therefore it's open to a plain argument that the relationship between customers and lenders is unfair. Yet the big bonus of using this law is where the burden of proof lies – it's for the banks to prove charges are fair rather than customers to prove they're not.
We presented this argument to the Office of Fair Trading but it said it didn’t feel it could take this on, as the law is about an individual’s relationship with the bank – so there was a greater chance of success if individuals did it themselves.
The arguments as to why bank charges are unfair under the CCA are as follows...
Customers can't opt out
All the same arguments as explained in detail in the UTCCR link above apply here including; customers can’t opt out; it’s an unfair cross subsidy; the effect of charges on vulnerable customers; the fact charges are designed to snare, the lack of competition; the incomprehensible nature of charges; and the difficulties they create for money management.
Fairness can ALSO be about price
The big advantage of looking at fairness under the CCA is it can also look at whether the price of a charge is fair. The original test case fell simply because the Supreme Court ruled that price couldn’t be looked at under the UTCCR regulations – yet that doesn’t apply here.
Therefore you can argue that the cost of charges are disproportionate to the service provided in other words the “they charge £35 for a letter, but it only costs them £2” argument.
The banks must prove they're fair
The best of all this is the burden of proof is on the banks to prove that the relationship is fair and not the consumers to prove the charges were unfair.
This doesn't apply to everyone
The date range that can be used for this is not as wide as the previous law. This piece of law applies to all new charges from 6 April 2007, and to people who had charges before April 2007 providing the borrowing was still outstanding on 6 April 2008.
There is still a question as to how this law applies to accounts that moved in and out of an overdraft limit over this time, but as it’s yet to be tested it’s too early to say what the result on this will be. As it’s the bank that needs to challenge the legality of the charges though, it's not an automatic disqualification.
Provisions for redress
The CCA also includes detail on what a consumer can be awarded if the charges are found to be unfair, which can include full or partial amounts – so the refund would depend heavily on a consumer’s particular circumstance.
This means it's potentially a much more valuable route for those trapped in a charges spiral and have suffered other loses as a result, eg defaults on their account, bankruptcy and repossession caused heavily by charges. Though of course that means the Ombudsman route applies too.
The Chance of Success?
This is completely untried and tested on bank charges. On paper it looks pretty good, yet establishing and arguing it will be difficult. So chances of success are virtually impossible to work out.
Certainly there’s no harm using it in your initial complaint to the bank, but think very carefully before taking on the major task of taking a court case based on this, you need to be legally confident and able to develop your own arguments.
Contact your bank
Now you need write to your bank explaining your complaint and firmly stating you’ll take the matter to the Ombudsman or court if it refuses to hear your case or if it rejects it. The aim here is to make it take you seriously, yet equally you need to go into this with your eyes open...
Almost certainly when you write, the bank will respond noting the Supreme Court decision means you can’t reclaim. Its aim is to put you off, don’t let it
Remember even in the days when banks were paying back millions to reclaimers, almost everyone who wrote got a rejection letter first time. Don’t let it phase you, it’s a step in the dance, we know from Ombudsman reports some banks use rejection purely as a tactic regardless of merit.
Free sample letters to adapt and send
Feel free to write the letter to your bank yourself, though below to help we have provided a number of sample letters for different circumstances that can be used as a base.
Please adapt these letters to your circumstances, and delete all the guidance notes in them. If you’re unsure ask a friend if it makes sense
Pick which letter is most appropriate to your circumstances. If you find the letters confusing then do seek any available legal help or speak to advisers at the Citizens Advice Bureau for help.
The Ombudsman is very keen that people explain why they’re in hardship rather than using legal jargon. While this is less important in the letter to the bank – it’s good to start here and explain why it’s been such an issue. It’s to be hoped the banks will be responsible and make their decision based on the Ombudsman’s guidance.
So tell your story naturally (and truthfully) and if you fulfil the criteria of hardship do make sure you include points that show it. As a short made up example...
“I lost my job as an electrician in July 2005, and as my wife was ill in hospital at the time things were very tough. Soon we were unable to pay the bills and moved into our overdraft and beyond it. We then started to be hit by charges of £35 a time, which were completely unaffordable and we were trapped unable to...”
Tell them about your circumstances, and add any evidence of hardship to speed the process up. This could include bank/credit card statements, a redundancy letter, a P45, confirmation of a special payment plan, a letter from a debt advisory service or anything else.
Answer the questions below to choose the letter closest to your needs...
. Have you already complained to your bank?
. Have you already complained to the Ombudsman? 
. Has the Ombudsman already contacted you?
. Have you had more charges since your last complaint? What happens next?
You should get a letter back from the bank acknowledging your complaint. They then have up to eight weeks to deal with it and it's likely they'll be swamped. When your case is dealt with there are a number of possible outcomes:
You’re offered a full refund. Chances... very unlikely
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. If it does… hoorah!
You’re offered a partial refund. Chances... unlikely
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.
A quick call saying, “I’ve had £1,300 of charges, you’re offering me £400 – I’ll take £800” has worked in the past, but is untested since the test case. Remember banks have to balance the administration cost of continuing versus clearing this off their books. And you need to factor in your hassle and risk of continuing against getting some cash now.
Please report your success in the reclaims success reports thread if you get a refund.
It offers a refund but says it should pay off your debt. Chances... unlikely
You may be offered a refund but told it must be used to pay off the debts you currently have at the bank (whether overdrafts or 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).
However if by the bank doing this you are still left in hardship eg you have mortgage or utility arrears, tell it. If it doesn't budge read Step 4 below.
It’ll ask you to fill in a financial statement form. Chances... moderate
If you’ve told the bank you’re experiencing financial difficulties and it’s unsure you fulfil 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.
Once you’ve sent that you could then get the same list of results as happens here.
The bank rejects your claim. Chances... likely
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.
Step 4: How to take it further
If you haven’t been able to negotiate a satisfactory settlement with your bank at this point, then we’re back to the original two choices.
It’s worth noting if you fail at the Ombudsman you can still go to court, but fail at the court and you can’t go the Ombudsman – making it even more plainly the first choice.
Take it to the Ombudsman
If you fulfiled the Ombudsman criteria in Step 1 – that’s the direction to go. Here you need to rely on the ‘human argument’ ie the problems charges have caused you as the Ombudsman has said it is unlikely to consider ‘templated 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.
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.
We will be producing a guide on this in the next couple of weeks (the link will be added here). The rest of this guide will concentrate on the Ombudsman route.
Step 5: Complaining to the Ombudsman
The Financial Ombudsman Service, is the official independent financial disputes body, and it’s completely free to use. It’s nothing like going to court and can all be done simply from the comfort of your home – either via the internet or post.
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.
It’s far 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.
How to complain to the Ombudsman
This is a deliberately simple process. There is a designed complaint form that you need to fill in, which can be obtained two ways…
By phone. Just call 020 7964 0500
- Online. Just go to the FOS website, where there is a Microsoft Word version or PDF version
You'll need to fill in and post back a copy of the form to explain your case and so it has a copy of your signature. You should also send copies of any previous correspondence you've had with your bank.
What to write on the complaint form
Honestly state what’s happened to you; the Ombudsman has specifically said it’s 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 (though it needn’t be over emotional – stick to the facts and the impact).
You can also ask for interest to be added to your claim as if you were going to court. After all (if you don’t ask, you don’t get).
To help we’ve written a guide in Word so you can easily cut and paste sections of it and/or print it out and have it next to you as you're filling in the FOS form:
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.
Although the Ombudsman resolves a third of cases within three months, the majority of cases do take longer (on average between six to nine months) plus it is currently receiving a record number of complaints from consumers and the complaints are getting more complex so expect a wait.
See the Financial Fight Back guide for other complaints the FOS can help with.
If you lose at the Ombudsman
For many people that’s it, you’ve lost and there are no further routes. The only option now available is to go to court and as already explained 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 Bank Charges: Court Claims guide. (We are currently still writing this but the link should go live in the next couple of weeks (and will be added here), get the weekly email for notification).
Bank Charges Reclaiming Q&A
Q. I’ve successfully reclaimed charges can they take my money back?
No. Previous bank charges payouts were made as 'goodwill gestures', as the banks did not want to set a precedent. As such, the money is yours and it cannot ask for it back.
Q. How likely is it I will get my money back?
Much less likely than prior to the Supreme Court result, but not impossible. The strongest hope is for those who fulfil the Ombudsman's criteria above... still, the best thing to do is plan for getting nothing, but cross your fingers.
We believe there is a strong legal case under the new arguments yet it is complex and it takes time for these things to play through. For money management's sake, it’s very important to assume you won't get a payout – though we hope there is still a chance.
Q. What’s so unfair about bank charges, it’s in the terms and conditions?
Go beyond your overdraft limit or have a cheque or direct debit payment bounce and banks can charge up to £35 a time even if you're only £1 over the limit.
Yet all it has to do is send a computer-generated automatic letter with a franked stamp. A report by a professor of banking estimated this cost only between £2.50 and £4.50. And this was being generous.
All in all, we believe this means bank charges are unfair and the banks had no right to grab your cash, which added up to huge amounts over the years.
And this isn’t just a campaigner’s view. Before the shock decision from the Supreme Court, the OFT had provisionally said it thought charges were unfair. Maybe going for a principled look at the law rather than looking at individual cases was a tactical error from the OFT.
The loss in the court was down to a legal technicality, which both the High Court and the Court of Appeal disagreed with; that unfairness can not be decided on price. Maybe they would have ruled differently if they were presented with one of the many 1,000s of people who slipped into an unauthorised overdraft due to error and got caught in a snowballing spiral of charges.
At the end of the day is it fair that the poor members of society are paying for the ‘fees-free' banking for the rich.
As for the ‘it’s in the terms and conditions’ question…
Of course, if you had read the terms & conditions when you got your bank account, the charges were in there. Yet that's irrelevant: a contract must be written within the law, and financial services must be fair. Let me use my favourite analogy for this:
If someone told you they were about to punch you before smacking you; it doesn't make it legal or fair. The same's true with bank charges.
No one's saying there shouldn't be bank charges, just that they are set massively too high; a few pounds would be more appropriate. People should have the ability to opt out and they should be structured so that they don’t snowball.
Q. Isn’t it just a punishment for taking money that isn’t yours?
A. Not at all, bank charges were introduced as a way to make profit.
It used to be that when you went beyond your limit the bank simply didn’t pay. Then some bright spark decided to set up a new hidden ‘paid limit’ where if you go beyond your overdraft you could still get money but be charged £35 a time for it. And the UK banks now make comfortably over a billion pounds a year from these fees.
Worse still the original design was one that trapped people into charges on charges. I remember a woman calling a radio programme. She went shopping thinking she was £50 from her limit but unbeknown to her an old cheque from months before had been cashed that day so she was actually at her limit.
She bought six items totalling £30-£40, one a bag of carrots for around a quid – and was charged for each – a total of £210. Even if she’d taken cash out and spent the money it would only have been one charge.
The reason I got involved in the bank charge reclaiming campaign in the first place was due to meeting a woman living off benefits as she was a carer for her autistic son. She did not spend more than she earned, and budgeted well.
One week the benefits failed to pay, her direct debits bounced and she had a couple of hundred quid worth of charges but no way to repay. A year later charges on charges had snowballed this to £3,000. If anyone is stealing money when it comes to bank charges – it’s the banks.
For full info on how charges are structured see How Bank Charges Work
Q. A company has said it can get my charges back for a fee, is this true?
A. Some firms may claim this, yet they have no more influence or power than you do. A number of claims handlers have notes saying they’re waiting for the legal info from this site before continuing (not with our permission, just using it) – so do consider whether you could just cut out the middle man and do it yourself.
For most literate and numerate people with access to the web, bank charge reclaiming at the Ombudsman is a straightforward process. While it takes a bit of time and effort, all the resources above should give you most of what you need to do it yourself.
If you need help though, the options are a lawyer or claims handler as they’re commonly advertised. Yet they are expensive and at best will take a huge chunk of the money that you’re owed. In general there’s simply no need to use another company and this site's stance is that it's easy and more lucrative to use the info above to do it yourself.
Yet there are times it may be suitable. Those with more complex cases, such as hardship cases stuck in court or anyone facing trickier areas of law may find professional help useful. The same's true of people with genuine financial phobia, lack of web literacy, or mental health issues.
If that’s the case, it's important to check out who you would use. If you are going to use a lawyer or claims handler ensure you…
Never pay anything upfront
At the moment there are some companies offering to carry out your claim for an upfront fee but if the company is not open and up front about its fees, which as a rule of thumb shouldn’t be much more than 25% of what you win, then don’t go there. Also feel free to ask for references from other satisfied customers, which it should be happy to do if kosher.
All claims companies must be regulated for claims management activities and will have a reference to check (eg CRM1234) on the Ministry of Justice database. Avoid anyone not on this list.
Q. Will the FSA regulate charges?
The perverse current scenario is that bank accounts must be fair when they are in credit because they're regulated by the OFT, but needn't be when they're overdrawn due to the court ruling.
Yet during the OFT’s test case the banks argued that their charges are a part of the ‘price' of a bank account – and the entire Supreme Court judgment rested on the fact it agreed with this. Yet it is the FSA that regulates deposit accounts including bank accounts and as this is now a core part of the price of the bank account it should come under its regulatory structure.
This is not a point for the courts, but we have suggested it to Whitehall and know it is being looked at there and by the FSA. A ruling that bank charges should be lowered and are set too high could then open the doors for easy reclaiming via the Ombudsman.
Q. How likely is it that bank charges will be lowered in the future?
Very likely. There is real cross party political will for this to happen and the OFT will continue to investigate whether charges are fair. It is likely we will soon see the end to such high charges for going beyond your overdraft limit.
We have already seen charges lowered by many banks (see the Bank Charges Compared tool).
The OFT has said it will continue to work to achieve change in the market and will enter into intensive discussions with banks, consumer groups and other organisations, reporting on progress by the end of March 2010. Updates will be in the weekly email.
It is seeking improvements around unarranged overdrafts in three areas:
Control. It thinks consumers need greater ability to manage their finances, both for their own interests and to ensure that bank accounts are more competitive. As a minimum it is looking at giving consumers the choice, rather than the banks, whether a payment goes into unarranged overdraft or not.
Clarity and predictability. The OFT says that current charges are not simple enough to understand or compare with other forms of short term credit eg Cheap Loans are much cheaper than an unauthorised overdraft.
Responsibility. It will be looking at when lending through unarranged overdrafts is appropriate, especially to customers who could be better off borrowing money elsewhere.
The OFT will also be looking at whether bank charges constitute 'responsible borrowing' and looking to publish new guidelines on that. After all, the nature of charges that spiral and entrap means many are effectively borrowing at levels they simply can't repay.
When that report comes out, it's likely the part-nationalised banks, RBS, Lloyds and Northern Rock, will have no choice but to follow its recommendations and political pressure will be put on the rest to sign up too.
Q. What’ve the politicians said?
A. The Government said in Dec 2009 it will ensure the system of unauthorised overdraft charges is made fairer for consumers in future (see the Bank charges pledge MSE News story).
It has said it will work with the OFT and FSA to create a new framework for fairer fees, but warned it would take action if a voluntary agreement can't be reached. It’s not yet set any timeframes for change though.
We had these quotes from the main political parties in Dec 2009 BEFORE the OFT decision to stop its fight, showing a unanimous will for change by all the parties:
Liberal Democrat Leader Nick Clegg said:
"Banks must not be allowed off the hook after the astonishing court judgement last month - the fight must go on.
"The excessive fees imposed by banks are simply wrong and must be changed. There is a simple principle of fairness at stake that bank charges must be transparent and proportionate.
"While the Liberal Democrats will keep up the fight in Parliament, I hope the OFT will act upon Moneysavingexpert's legal advice to continue pressing the case through the courts."
Conservative Shadow Financial Secretary Mark Hoban said:
"November's Supreme Court judgement was a blow for consumers. The OFT have said they will explore the use of other powers to investigate and we support that.
"We have already called for a competition review of banks - it must include consumer banking charges. November's judgment has perpetuated the uncertainty over bank charges which is damaging for the entire industry."
Exchequer Secretary to the Treasury Sarah McCarthy-Fry MP said:
"The Supreme Court decision is obviously very disappointing for the many consumers who feel they haven't been getting a fair deal on bank charges. The OFT is considering the judgment in detail and will report back in the next few months.
"In the meantime we are focusing on ensuring we have a fairer system of charges for the future. We hope to do this through a voluntary agreement with the banks, but we don't rule out further options if a voluntary agreement doesn't deliver the changes we need - greater transparency and more proportionate charges.
"Through the Financial Services Bill we are also legislating to give consumers the ability to take a group action through the courts, where in the future there is mis-selling or abuse on the parts of banks."
Q. Does the Supreme Court loss mean the campaign was wrong all along?
Certainly not. It's worth thinking about the result of this campaign so far. Even if no one else got another penny back - that means over £1bn was already reclaimed. Add to that the fact many banks have lowered their fees, and people have learned banks are there to sell - not to advise - and that you can challenge them.
Even with the poor court result, that makes it the most successful consumer campaign since the poll tax riots. Never mind the fact that both the High Court and the Court of Appeal agreed with the OFT's case.
Q. Might a group action take place?
Another option is to look at co-ordinating a private test case and a group legal action - a bit like a class action in the US. This is where they take a sample number of test cases and others ‘register an interest' which leaves their court cases on hold.
The problem here again is that this is a huge undertaking and expense; it is likely to cost in the low millions – and the only way to fund that would be to ask individuals for money to join the register, or work with ‘no-win, no-fee' agents.
Even if we, or another consumer body, did this it’s not something that will happen quickly, and could mean another few years wait. It would also be very complicated and would involve significant costs to both sides, which will have to be funded by some means.
There is also the potential that the losing side will have to pay the legal fees, probably running into millions, of the winner and it may not be possible to insure that liability.
One of the main issues here is how some of the country's poorest are meant to fight the deep legal pockets of massive banks (in many cases funded by the taxpayer).
There may be another opportunity to take a group or ‘class action’ if the proposed Financial Services Bill is passed next year. More info on that will be in the weekly email if and when it happens.
Q. Where can I get further information – are there other sources
There’s this site’s Bank Charges Forum where many reclaimers discuss things, there are also a number of very good smaller free fellow campaigning websites dedicated to reclaiming unfair charges and helping consumers.
The ConsumerActionGroup is a focused web forum based around reclaiming charges; it's run by a group of people who took on the banks in the very early stages. PenaltyCharges is run by a law lecturer who successfully took on the banks and campaigns on the site and LegalBeagles has regular updates on the campaign.
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1. You're in financial hardship
Under both standard banking regulations and the Lending Code (an agreement that all major banks have signed up to) banks must treat you fairly and be considerate if you are in financial difficulty.
We have therefore used these criteria as well as guidance from the Ombudsman to try and give some ideas as to what would count as hardship:
Can’t pay for necessities. You’re struggling to meet basic necessities eg mortgage, council tax, food, utility bills
Can’t pay debts. You’re struggling to make loan and credit card repayments
Income eaten by charges. Your income’s being eaten up by repaying charges (eg you’re being asked to pay £50 of charges from a £100 weekly benefit income)
Payments regularly returned. Your payments regularly get returned unpaid as you’ve not enough money in your account
Substantial drop in income. For example, you’ve lost your job, started a lower paid job, needed to take parental or carers leave, your partner has died, you’ve separated from your partner, you’ve started full time education or you/your partner has been/gone to prison
Disability or illness. You’ve needed to increase spending on something due to a disability or serious illness
Going bankrupt or into debt management. You’re going bankrupt, getting an IVA or Debt Relief Order or are in a debt management plan
Continually living off credit. You’re living off credit and regularly need to increase your credit limit
Regular credit card cash withdrawals. You are using regular cash withdrawals from credit cards to make ends meet
Frequently over overdraft limit. You frequently go over your overdraft limit. In earlier incarnations of hardship rules this was explained as having more than £500 of charges a year – so that seems a good benchmark