While every effort’s been made to ensure this article’s accuracy, it isn’t intended to be seen as legal advice and no liability can be accepted for any individual claimants who rely upon the information given.
Supreme Court Test Case Result Date Announced 9.45am Wed 25 November
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Reclaiming bank charges is the biggest consumer revolution since the poll tax riots. It’s estimated the banks have already paid out nearly £1 billion.
p.s. Listen to the bank charges song which hit no 25 in the charts. |
This is a step-by-step guide, including template letters, on how to force your bank or building society to repay the last six years' charges for going beyond your overdraft limit, or for cheque and Direct Debits bouncing.
Reclaiming is on hold, which means banks will accept but not process claims. Yet hundreds of thousands have already successfully reclaimed £100s or £1000s, and its important you put a claim in asap. To date 6,260,700 template letters have already be downloaded from this site.
- Reclaiming bank charges in a nutshell
- Does It Really Work?
- Guide to reclaiming charges (inc. letters)
- Step 1. Find out and total all your charges
- Step 2. Write asking for your money back
- Bank Charges Interest Calculator
- Continuing your claim
- Step 3: Threaten to take it to court
- Step 4: Go to court or the Ombudsman
- Going to the Ombudsman
- Going to court
- Where to get further help
- Discussion: Reclaim Charges, Report Successes
The best way to deal with bank charges, is to avoid them in the first place.
Find Out How
Why can you reclaim bank charges?
The reason you can reclaim is simple; it’s because bank charges are unlawful. Of course, the banks don’t agree, which is why there’s currently a test case to decide this once and for all. Yet this guide isn’t about making a political point; it’s a practical guide to getting your money back.
The law behind this
The core argument is that banks should only impose charges which are in proportion to their costs. This is because under the Unfair Terms in Consumer Contract Regulations the charge should not exceed the cost to the provider.
Yet go beyond your overdraft limit or have a cheque or direct debit payment bounce and the banks charge up to £39 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 costed only between £2.50 and £4.50. And this was being generous.
All in all, this means, I any many others believe, bank charges are unlawful, so as the banks had no right to grab your cash, but still did it, you’re entitled to get it back.
The banks’ primary argument has been that ‘unfair contract’ terms don’t apply to bank charges, but the Office of Fair Trading (OFT) disagreed so started the test case to find out. Yet that has twice been blown out of the water, with both the High Court and Court of Appeal having decided that bank charges are governmed by these rules. A great step forward for reclaimers.
The next stage is for the OFT to assess whether it thinks bank charges are actually unfair, and we are expecting to hear more on this on in the next few months. See the Bank Charges News article for updates.
Isn’t it in the terms and conditions though?Of course, if you had read the terms & conditions when you got your bank account, this was in there. Yet that’s irrelevant: a contract must be written within the law, and they can’t enforce a contract with legally unfair terms. Ultimately, if it isn't proportionate then it's unlawful, and thus you've a right to your money back. Let me use my favourite analogy for this:
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. Yet it’s important to remember, the banks have designed the charges to make them serious cash
Does it really work?
Getting your money back isn’t an official process like it is for Endowment misselling or even quasi-official like Mortgage Fee reclaiming: it's about challenging the big beasts of the banking world.
Yet you’re not alone, since the campaign to reclaim bank charges started 6,260,700 template letters have been downloaded from this site alone; representing around 2m people. Almost every one, until the hold on reclaiming, was successful and even since then some people have got through, especially if they are in financial hardship. The highest reported reclaim is £36,000; here’s a couple of examples for inspiration:
- Dec 2007. “Posted off 1st letter and was called the next day with an offer to refund all but the service charge. So complaining about it works even before the test case as I had really only sent the letter to register my complaint. I got £130 back.”
- Nov 2007. “After the online court papers were served I was surprised to get a letter offering me the full amount without interest which I of course accepted. I’m still getting letters from its solicitors saying that my claim has been put on hold obviously the bank hasn’t let them know they’ve settled for the full amount of £4,300.”
For further inspiration read the many 1000’s of Bank Charges Successes & report your own.
Step-by-Step Bank Charges Reclaiming Guide
While we await the next stage in the test case process, the regulator, the FSA has kept the hold on reclaiming in place.
However don’t sit back and wait; its important to stake your reclaim as soon as possible; primarily as over a million people have already done it, and many thousands more every day. So to be ahead in the queue act quick. For more on why claiming now is important read the Bank Charges News article.
However, the bank charges landscape frequently shifts, and things change. So please ensure you're getting the site's free weekly MoneySaving e-mail that'll notify you of any important changes.
What to watch when reclaiming
There are a few minor inconveniences, such as:
Your relationship with that bank may suffer
Reclaiming 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.
There is also a very 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.
To check how the charges from your bank stack up see the Bank Charges Comparison tool.
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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 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, to be completely safe, it may be worth opening an alternative, or ‘parachute’, account with another provider before you start. See Best Bank Accounts.
Step 1. Find out how much you can reclaim
As a rough rule of thumb, try to reclaim all charges dating back to July 2001. This is because the standard rule is you can claim back six years, yet the FSA said the clock stopped when the hold on reclaiming started in July 2007, and this is six years before that.
This applies whether you’re in England or in Scotland, even though in courts north of the Border the standard rule is a shorter five years. We’ve suggested six years in Scotland because you’re not going to use the courts, but the Ombudsman, where there’s no time limit.
Truth be told, there are varying views on how far back you can reclaim, and lots of mixed messages. So you may as well try for the longest reasonable period possible, and this is it. For a detailed explanation of the different views read how long can I claim back?
Once you’ve decided how far back you want to go, tot up the charges over that period. It’s important to understand we’re only talking charges for exceeding an agreed overdraft limit or for a bounced payment, not normal account fees or interest charges (see a list of Bank Charges: What you can reclaim).
How to find out what you’ve been charged
Let’s be honest, how many people have six years or more worth of statements? If you’ve online banking access, first see what’s available there. If not, send a letter to your bank requesting a comprehensive list of all past overdraft charges.
Some banks will send you the info if you phone to ask (we’ve had feedback that sometimes Barclays, Halifax and HBSC have done this) so try this first. If not, you have 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 banks may stall the process by later writing to ask for the money. Yet you could always take the chance they send you the information anyway, it’s up to you. Importantly…
Don’t ask for statements, request a list of charges. Banks can charge PER statement, so six year's worth is a hefty cost.
Plus the list makes it a lot easier to work out what you’ve been charged. This template may help:
If you don't know where to write to, MoneySavers have compiled a list of data protection addresses which should help.
The bank only has a maximum 40 days to respond. If you don’t get it, regardless of the banks excuse, follow up with a phone call and then report it to the Information Commissioner for a breach. This OFT test case has not changed this. Banks cannot use the hold as an excuse for any delay.
Step 2. Write asking for your money back
Now it’s time to contact the bank and ask for your money back. Simply write and say you believe all the past charges (and detail them) were disproportionate and you want all the money back. Here's a template to help (different letters are available for those in financial hardship):
Charge interest on top?
If you took a claim to court and won that way, you would be entitled to add 8% interest (which is not compounded) on top of the compensation from the date of each charge. Therefore, you may want to ask for the interest as part of the initial claim.
It's important to understand you are not legally entitled to interest unless you win in court, yet it’s all part of the negotiation process, which is an art, not a science.
If you'd prefer the easier option, simply ask for the charges without interest in the early stages.
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, and here's a template of the letter to send to your bank:
What happens next
Most people should get a letter back from the bank acknowledging the complaint, yet saying that the financial regulator, the FSA, has given it permission to suspend all bank charges complaints. The same is true if you try and go to the Financial Ombudsman. Ardent and experienced reclaimers could try and continue with your complaint in the county court, but in most (although not all) that will be put on hold too.
“Now it’s simply a case of waiting while the test case lawyers battle it out.”
The rest of this guide was written before the test case was announced; and remains for reference. Once the test case is resolved it’ll be updated.
Continuing your claim
Step 3: Threaten to take it to court
To continue your claim, either during the OFT test case or once it has ended, the next step is to write back to your bank to say you’ll be starting court action if it doesn’t settle. In many ways this is a repeat of the previous step, but in more militant fashion. You should include a strict limit of the time you give it to respond. Some people skip this step, but it’s often worth a shot, as if it works it saves actually having to start the court process.
At the moment this step is unlikely to actually get your bank to pay out, but it’s a warning that you mean business. Some MoneySavers are still reclaiming charges in their local county courts, although each local court is dealing with complaints differently so there is a chance yours could still be suspended.
It could be possible to speed up the process
If you want a speedy settlement, one tactic is to offer the bank the option of settling for a lower amount if it pays out now. How much lower depends on you, but 25% less is a good rough guidance. There’s no need to do this, it’s your choice, though if you choose to the letter below is drafted to help. Do note the phrase ‘without prejudice’ I’ve used, it’s crucial. It means that the offer isn’t binding or admissible in any further legal process.
Should you accept a partial offer?
If you are given this choice it’s a tough decision at any stage in the process. Whilst there’s a temptation to say ‘fight the good fight and take ‘em on’, what’s actually more important is protecting your pocket. Let’s say you’ve £2,000 of charges and are offered £1,200; the first thing is try not to think “I’m £800 short” but instead that you’ve got £1,200 you thought was gone forever.
The ultimate decision is yours. It’s a combination of whether you want the hassle of continuing versus getting the cash. The likelihood is that if you carry on you will get the money, but it will take longer; then again it’s not guaranteed and there’s always a chance (however small) you’ll lose and not get anything.
There's nothing wrong with calling the bank at this point and telling them what amount you'll settle for, e.g. "I believe you owe me £1,400; you're offering £1,000, I'll take £1,200". It can work: remember the whole thing's about negotiating.
This is your personal decision and depends on your circumstances, such as how much you need the ‘certainty of the cash’.
Step 4: Go to court or the Financial Ombudsman
If you’ve reached this stage, you now have two choices and need to either consider getting legal on their backsides or going to the Financial Ombudsman (FOS), which also has power over these cases.
It may seem strange, having threatened court action, to now consider a change of tack and go to the Ombudsman. The reason is simple, threatening court action in the earlier letters is more likely to push the bank into offering a settlement; yet remember this guide is a negotiation path designed to get you your money back as easily and swiftly as possible.
So once we’re at this point, even though we’ve threatened court action, there’s no need to follow through. If the right move is to change tack, that’s not a problem.
The two choices are as follows:
- Financial Ombudsman Service. This is a free and independent service created by parliament to help settle disputes between financial companies and their customers. It will deal with bank charges complaints, and you will need to sign a consent form and send copies of your documents but you then hand over contact with your bank to the Ombudsman. To find out exactly what to do read the going to the Financial Ombudsman section.
- Small Claims Court System. Don’t automatically think judges and wigs, this is actually about filling out a claim form online (or by getting papers from your local court). There’s a fee from £25 to £100 depending on how much you're claiming, but it's refunded with successful claims. To find out exactly what to do read the going to court section.
Pros and cons
Originally the FOS was slower and more cumbersome than going to court; and it still can be slower, yet it’s risk free (as you can’t lose your fee) and so far there’ve been no reported failures; plus there’s no risk that you will need to go in front of a judge and argue the case while this is always a chance, and should be something you're prepared to do, if you choose the court route.Yet put a bank charges claim to court and if, as is common, the bank doesn’t acknowledge the claim (see later for more details on this), you’ll win by default in 14 days and get your money back speedily and with the 8% interest added on top, while the FOS will take a few months. Yet if the bank does acknowledge the claim the court process could take a lot longer and you could get involved in a fight.
There’s no hard or fast rule as to which is better. If your claim is smaller, for example under £1,000 it’s more likely the bank won’t be keen to see the process through; so the court is likely to be speedier. For bigger claims the more limited risk of the FOS becomes more favourable. Court is the more aggressive process the FOS the safer.Before deciding why not read through the detailed description of each process below, although I now lean towards the Ombudsman as the preferred option for most.
Going to the Financial Ombudsman
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The Financial Ombudsman Service (FOS) is an independent service for settling disputes between financial companies and their customers and the service it provides is completely free.
The FOS will usually only assist in your case if it has been over eight weeks since you sent your first complaint letter (see step 3), so follow the rest of my steps until it's been eight weeks; unless your bank has sent you a letter suggesting you use the Ombudsman, when it can help sooner.
How long will it take?
The Ombudsman should take around two to three months to handle your complaint. Yet it's important to understand that now this strategy is being included in this article it could mean many more people going to the FOS as this is read by literally millions (see the reclaiming stats on the home page) and there’s a risk that could slow things down.How to make your claim
You just need to contact the Ombudsman and ask it to take on your case. You can either do this by calling 020 7964 0500 or via the FOS website. After contacting it, you'll need to fill in and post back a copy of its complaint form to explain your case and so that it has a copy of your signature. It’s important you ask for interest as if you were going to court (don’t ask, don’t get).FOS Complaint Form: Microsoft Word version or PDF version
While the form is quite simple to fill in, it's important to take care doing it. To help I've written a guide, which takes you through filling in the form step by step. It's written 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.
You should also send copies of any previous correspondence you've had with your bank.
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.
How does the Ombudsman work?
When the FOS receives your complaint its job is to settle the argument and come to a decision about your case. It does this by going to the bank in question and asking it about the case. If the bank does not agree to make the payment to you, the Ombudsman may carry out a formal investigation.Yet in the case of bank charges, there have been no reports of this happening, so you have a very good chance of getting what you asked for. The worst possible case scenario (which has never occurred) would be an investigation was carried out and you didn’t get any money.
If for some reason you’re not happy with the FOS’s decision, you do not have to accept it and you can then start court action if you would like. However if you do accept the Ombudsman's decision, it is binding on both you and your bank (meaning your bank can’t appeal and has to pay you back) and if you have already been to court and have lost you’re not usually allowed to then take your case to the FOS afterwards.
Also, see the Financial Fight Back guide for other complaints the FOS can help with.
While it’s not the preferred method, if you do choose to go to court rather than opt for the FOS, go online for ease. It doesn’t usually get as far as you having to turn up in court as banks don’t really want to get that far as it would mean having to reveal their true costs or set a precedent for other courts to follow.
It’s all about the small claims rules
In a standard court, the losing party may be asked to pay the legal costs of the winners. This can be very expensive, yet if a case is heard under the ‘small claims’ system in the vast majority of cases, costs are not awarded, making it a much less risky bet.Small claims in England and Wales are cases under £5,000, that’s before any statutory interest is added. Try to keep claims below this if possible, either by making a separate claim for each different account with the same bank, or if you're just a few hundred above the limit you may want to consider lowering the asking amount down to £5,000 (even if your earlier letters demanded more) to minimise the risk.
Yet even if your claim is much bigger for just one account, and you're not eligible for the small claims system, take it seriously but don't be unduly put off; though if this concerns you, you may want to consider seeking legal help (see later).For those in Scotland and Northern Ireland, while the law is similar, the small claims process works differently. In Scotland the maximum claim is £3,000 (increased from £750 in Jan 2008) and you may only reclaim 5 years' charges, in Northern Ireland the maximum claim is £2,000. This article is written based on the process for England and Wales, so for more details see Northern Ireland Courts and Scottish Sheriff Small Claims.
How to make your claim
Use the Moneyclaim website in England and Wales (there's also the Northern Ireland Courts online) which can be used for starting most county court money claims, just go there and fill in the form. There’s a fee of between £25 and £100, depending on the size of your claim, which can be paid by a credit or debit card; though it’s refunded if, and hopefully when, you win.
If you don’t have plastic to pay on, get the paperwork to start the claim from your local county court and pay there; it’s the same price. This may be waived if you’re on benefits.
Once the case is started there’s a race on between you and the bank; can they get in a defence or at least acknowledge they’ve had the paperwork within 14 days? If not you can ask for a judgment against the bank for the full amount of the claim without any hearing (see step by step guide below).
As a technical note, while it’s rare with these cases, submitting a claim for no more than £5,000 doesn’t guarantee it’ll be heard as a small claim; if it’s contested and seen as a difficult case, it can be tried in the county court as a non-small claim (on what are called the ‘fast track' or the ‘multi track'), which could imply costs, though this is very rare. Changes to court claims will be included in the free weekly email.
What happens next
After you’ve submitted your claim, what happens next depends on the bank’s reaction. It takes five days for the claim to be ‘serviced’ and all deadline dates start from that point.-
VICTORY. The bank settles in full.
For the sake of expediency the bank may settle in full as a ‘goodwill gesture’, including interest and court fees; though it almost certainly won’t admit it ever did anything wrong. This is common for smaller claims. -
VICTORY. The bank does nothing.
This is a common outcome; often the bank simply doesn’t acknowledge the claim and this means you automatically win by default 14 days after the claim is served (which takes 5 days). At that point, you must request ‘judgment by default’, this can be done online, and you should do it as soon as possible (get it in your diary and plan around it to the second if possible) after the 14 days ends. -
VICTORY. The claim’s acknowledged but there’s no defence.
Banks have 14 days to acknowledge a claim after it's served. If that’s done they have a further 14 days to respond and enter a defence. Commonly they do an acknowledgement, but no defence is entered. Again this means you win, though this time after 28 days. At that point, you should immediately request a ‘judgment by default’. - It says it will defend the claim.
I know this is the point where people get scared, which is what the banks want. If you’re one of the very few cases where the bank does enter a defence, don’t worry too much, this is pure posturing. In almost every case it's simply a way to try and make you settle, or argue that you've asked for too much (e.g. you've gone beyond six years or tried to claim compound rather than statutory interest). -
Your case is stayed.
Since the OFT announcement in July 07 banks have been asking for bank charges’ court cases to be suspended until there is more clarification on the legality of the charges, and some county court judges have been granting these requests.
If this happens to you, you can either wait until the test case has ended to continue your claim or request a removal of the stay, by completing form N244 and paying a fee of £75.
One reason to request the stay to be removed is if you are experiencing financial difficulties. Although there is no firm definition of what this is, it generally applies if your income is not enough to cover reasonable living expenses and afford your financial commitments such as utilities, rent and council tax. There is more information on this in the Bank Charges News article.
Yet, at this point you’re now in the proper court process. There’s a straightforward form called the Court Allocation Questionnaire which you need to fill out and return to the court with a £35 fee. The next stage should be a small claims hearing date, and if you get to this stage, there is a further fee of £25 - £300, depending on the amount of your claim.
What usually happens next is that the companies will either not turn up, in which case the judge simply throws the case out and awards in your favour, or will ask for a stay of your case. See below for more info on what to do if this happens.Yet a bit of work beforehand is useful (and it’ll make you feel more confident) in case you have a hearing. For a detailed guide to the court preparation process, there's a special section on the specialist free bank charges reclaiming website, the ConsumerActionGroup, (you need to log in to get the info) and a funny post explaining what can happen inside the courtroom.
If it doesn’t pay send in the bailiffs
Sadly, when the banks don’t defend a claim, they don’t always pay up automatically even though they’ve lost. Whilst mention of bailiffs isn’t normally the most cheerful subject on this site, let’s happily make an exception. If the bank doesn’t pay, you’ve a right to send the bailiffs in to claim the money; a number of people have exercised this option, and again it’s easy to do via the Moneyclaim site.Where to get further information and help
This mass consumer action has grown extensively since it began and already many people have successfully been through the process. Someone has already faced almost every eventuality and many people are willing to help share their experiences; so here are further resources to use if you get stuck.Free Resources
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Discuss it with other MoneySavers. There is an entire section of the Chat Forum dedicated to reclaiming bank charges, where thousands of people regularly discuss it. Go to the Reclaim Bank And Credit Card Charges Board.
- Other Bank Charge Websites. There are a number of small free websites dedicated to reclaiming unfair charges and helping consumers. The ConsumerActionGroup is a focused web forum based purely 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 student who successfully took on the banks and campaigns on the site and LegalBeagles has regular updates on the test case.
Need someone to do it for you?
For most literate and numerate people with access to the web, bank charge reclaiming is easy. 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.
The other alternative is to use a lawyer or claims handler, 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...
Never pay anything upfront or if you lose - use strictly no win no fee operators
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 (e.g. CRM1234) on the Ministry of Justice database. Avoid anyone not on this list. We are planning a full review of claims handlers and which offer best value, info when published will be in the weekly e-mail.
Always double check the product details before signing up to them
Spotted out of date info/broken links? Let us know via brokenlink@moneysavingexpert.com
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