Bank Charges Hardship

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

Bank charges reclaiming may be on hold for most, but not if you’re in financial hardship, even if your case was previously suspended and you weren’t struggling then. This is a step-by-step guide, including free template letters, to reclaiming bank charges if you’ve got financial problems. The biggest reported payout so far is a mammoth £12,000.

• Bank Charges Reclaiming in a nutshell
• What counts as hardship?
• Kick start your claim
• Reclaiming steps with template letters
• Step 1: Find out how much you can reclaim
• Step 2: Write asking for your money back
• Step 3: The bank’s response
• Step 4: Fighting on… the Ombudsman
• Need someone to do it for you?
• Discussion and report sucesses

Write to ask for your money back

Bank Charges Reclaiming in a nutshell

Go beyond your overdraft limit, and your bank or building society will typically charge up to £39 a time. This can add up to huge amounts over the years, yet these charges are unlawful.

That’s not just a campaigner’s view. The High Court and the Court of Appeal say bank charges ARE covered by fairness laws, and the Office of Fair Trading has said it provisionally thinks they are unfair. Yet the legal process still has a way to go.

From early 2006 until July 2007, it’s estimated the banks paid out nearly a billion pounds to 100,000s of reclaimers to avoid going to court. Then a test case to finally decide the law was agreed and BANG, reclaiming was put on hold by the regulator, the Financial Services Authority (FSA).

This ‘waiver’ means neither the banks, the courts, nor the Ombudsman can process claims until the case is finally resolved (there are further stages left). Yet that doesn’t apply to people in financial hardship and that’s what this guide is all about.

For further general updates on bank charges see the main Bank Charges Reclaiming & Bank Charges News guides and remember, the hold doesn’t apply to Credit Card Reclaiming. Do note that from here on, the word ‘banks’ is used as short for banks and building societies.

Why it’s different if you’re in hardship

The FSA ensured the delay can’t harm those people in greatest need. The hardship exemption has been part of the hold since it was first introduced in July 2007, yet the original lack of detail meant, for most practical purposes, the exemption wasn’t usable as banks could simply say: “You’re not in hardship.”

This changed, after much lobbying, in July 2008, when the exact definitions of hardship were clarified and the FSA strongly reiterated that if people were in financial difficulties, the banks and the Ombudsman would need to process their complaint immediately.

This chink of light is now a wide beam as more and more people are successfully getting thousands of pounds each back. Between 27 July 2007 and 31 August 2008, 68,000 people in hardship made a complaint – an average of 15,600 every three months. But between 1 September and 30 November, following the release of the hardship definitions, there were 29,000 complaints over that three-month period.

The most important thing about this hardship rule is...

The exemption applies whether you’re starting your claim now or it’s already on hold, even if you weren’t in hardship when you originally started to claim.

And while the fact you can claim doesn’t mean you’ll always get an automatic payout, many are successful and it costs nothing to try. And better still, if you are counted as being in hardship and you go all the way to the free Ombudsman service, no bank has ever contested it there, meaning if the FOS agrees you should have some form of pay out.

Here are some examples for inspiration:

MoneySaver JL says: "I wrote to Halifax last year claiming financial hardship. Then it sent me a budget statement. It has just agreed to pay me £10,000 which will now go towards paying off other credit cards and I will soon be debt free."

MoneySaver bradderz: "We faced repossesion and the advice of the Financial Ombudsman was invaluable. His advice and our perserverance resulted in an offer of around £1000, approx 2/3 of our claim, which we accepted."

Please report your hardship successes and stories to help inspire others

What counts as financial hardship?

This, of course, is the nub of the article. To have your case heard, you need to fulfil the Financial Services Authority’s official definition:

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

This means when you can’t afford commitments such as utility bills, rent and council tax, or if you’re struggling to repay debts such as your mortgage or credit card.

That definition is quite general. But if it sounds like it applies, to find out if you fit one of the FSA’s specific examples, it’s important to go through its official hardship guidance below. Yet sometimes it’s not exactly in plain English, so we’ve added a ‘translation’ to each.

Are items repeatedly being returned unpaid due to lack of available funds?

Translation: Do your payments regularly bounce?

Are you failing to make loan repayments or other commitments?

Translation: When you can’t afford mortgage, loan or credit card repayments.

Is there a discontinuation of regular credits?

Translation: Do you no longer have money coming in, or regular income, such as when you lose your job? (See the full Redundacy Guide for hints and tips if you have lost your job).

Is there a notification of some form of insolvency or court proceedings?

Translation: Are you going bankrupt or getting an IVA (see the IVA guide) or Debt Relief Order?

Are there regular requests for increased borrowing or repeated rescheduling of debts?

Translation: Are you living off credit, struggling to repay it and regularly needing to increase credit limits? Or do you have a special debt payment plan in place with lenders as you can’t afford repayments at the usual rate?

Do you make frequent credit card cash withdrawals at non-promotional rates?

Translation: Self explanatory. However, if you’re taking cash out on a credit card, the interest rate is hideous and it usually indicates a problem.

Do you repeatedly exceed your credit card or overdraft limit without agreement?

Translation: Self explanatory. It then goes on to say that “where a complainant has incurred over £500 in unauthorised overdraft charges in the previous 12 months, that is to be treated as indicative of financial difficulty”.

This is interesting. It effectively means if you get over £500 of bank charges each year then, almost by definition, you’re in financial hardship. Many with large claims will be in this boat.

If this applies, either alongside or separately from the other points above, tell your bank you are living on benefits and ask that it considers your complaint now.

Your bank should help

Importantly, banks are supposed to conduct a filtering process to ensure cases of genuine hardship are heard during the waiver period. Though it’s also important to argue your case and explain that you’re in financial hardship and that your case should be dealt with now.

If you have a basic bank account this could help your case, as these are generally intended for those with financial problems.

Proving you’re in hardship

For most people it shouldn’t be a problem as the bank will ask you to fill in a form and it’ll be obvious if you fit the criteria. Yet as a back-up, once you have tried the suggestions in this guide, the non-profit debt counseling service the CCCS (Consumer Credit Counselling Service) can look at your circumstances and make an independent decision whether it thinks you meet the financial difficulties criteria.

If you do, it will provide a letter for you to forward to your bank. While this isn’t guaranteed to change your bank’s mind, it may help.

To get it to look at your case, call 0800 138 1111 (Mon-Fri 8am-8pm) and say you are hoping to reclaim your bank charges under the financial hardship criteria. An adviser will book you an appointment with a trained counsellor who will help you complete a full financial statement and discuss whether you meet the hardship criteria.

How to kick start your claim

If you’ve already tried to get your charges back but been its been put on hold, don’t worry. Whether you’ve been told to wait for the test case result by your bank, the Ombudsman or court, if you’re hardship you can kick start the campaign.

Where to start depends on what you’ve done already, so to help we’ve build this special Reclaim Restarting Checker...

Step-by-Step Reclaiming Guide with template letters

If you fall into or near the definitions of financial hardship, the process is pretty simple. You request info on the total charges for the last few years, then ask for your money back, telling your bank you’re in hardship and see how far you get. If you’re turned down, take your complaint to the free Financial Ombudsman Service.

Yet, remember the hardship exemption DOESN’T mean banks must pay out, as there’s no final ruling yet on charges’ legality. It means it must consider your claim now, not wait until after the test case is done & dusted. Usually, you will get a goodwill payout of some sort, as banks have little option (though this may only be once you’re at the Ombudsman stage).

If you don’t fulfill the financial hardship definitions, it’s still important to get your reclaim in as soon as possible, as over one million are in the queue, so the sooner you get your letter in, the higher up that list you should be. For that, see the main Bank Charges guide.

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. If, as part of your hardship claim you are offered some kind of payment plan, ensure you check any effect the plan could have on your credit rating.

  There is 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.

  To check how the charges from your bank stack up see the Bank Charges Comparison tool.

• 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, MoneySavers in the forum have compiled a list of bank addresses which should help.

The bank only has a maximum 40 days to respond. If you don’t get it, regardless of the bank’s excuse, follow up with a phone call and then report it to the Information Commissioner for a breach. The OFT test case has not changed this rule. Banks cannot use the hold as an excuse for any delay.

Step 2: Write asking for your money back

Contact your bank urgently and tell it you believe you fit the FSA’s definitions of financial hardship and therefore your claim is exempt from the waiver rules and you would like it to be dealt with immediately (template letter below). If you’ve already started your claim then explain your circumstances in the letter.

Firmly state you’ll take the matter to the Financial Ombudsman if it refuses to hear your case or if it rejects your complaint. Sadly, the Ombudsman says banks aren’t always adhering to the rules. So make it clear from the outset you are serious, but be prepared to pursue this with vigour.

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. Here's a template to help, although read on if you want to add interest to your claim.

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:

Charge Amount: £ When was the charge? D: M: Interest owed: £ Total to claim: £	Charge Value Date Interest Total

Step 3: The bank’s response

At this point there are a number of possible outcomes, the most common is…

• It’ll ask you to fill in a financial statement form

  If it’s unsure you fulfill the hardship criteria, or even just to deliberately delay, it’ll 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.

Yet even if the bank has accepted your initial word that you’re in financial difficulties or does after you’ve sent in the form, it’s important to understand one thing…

The hardship exemption to the ‘hold’ doesn’t mean it has to give you your money back, just that it has to consider your claim.

The likelihood of you getting a refund depends on how much the bank feels you're struggling to meet your priority bills. It can think you're in financial difficulty but not in hardship.

Yet, even if you don’t get your charges back, putting a claim through may stop you getting hit with further fees as the FSA has also suggested banks consider stopping any future charges and/or stop any debt enforcement action against those in difficulty, so it's always worth trying.

Another option may be for the bank to offer you a payment plan to manage any debts you have with it. This may have an effect on your credit rating so check fully that it's the best option for you before agreeing.

There are now three further possible things the bank may say:

• You’re being refunded in full… HORRAH!

  Though rare this early, it may offer to refund you in full as a “goodwill gesture”. Banks always do it this way, never accepting responsibility. If it does, great!. Please report your success in the hardship reclaims success reports thread.

• You’re offered a refund, but not the full amount

  Again it’ll almost certainly be a “goodwill gesture”, but the fact it’s willing to make an offer is good news – the cash till is open. Do remember this is all about negotiation. What are you willing to settle for? How much is it willing to pay out?

  Consider going back and asking for more, both by phone, eg, saying: “You owe me £1,400, you're offering £1,000, I'll take £1,200." Then write a more formal letter, perhaps detailing the amount of priority debts you have. This can, and has, worked. Banks need to balance the ongoing costs of a claim against simply paying out.

  If it’s not willing to pay what you’d settle for, there’s a temptation to say to yourself: “Fight the good fight and take ‘em on”. Yet it’s more important to protect your pocket. Let’s say you’re asking for £2,000 back, and are offered £1,200. Don’t think: “I’m £800 short” but that you’ve got £1,200 that was gone forever. Would this cash sort your financial burdens?

  While it looks likely the law will be resolved in reclaimers’ favour, that’s not 100% certain, so if cash now would be valuable your ultimate decision should be a combination of whether you want the hassle of continuing versus getting the cash. Accepting a partial amount does not mean you forgo rights to the rest though. The FSA waiver has an important clause saying:

  "if the outcome of the test case produces a result that is more favourable to the complainant, the firm must take all reasonable steps to pay any difference in the amount of compensation actually received by the complainant and that that the complainant would have been entitled if his claim has not been settled by the firm then;" Source: FSA Waiver

  In plain English, this means if we win then you'll be able to ask for the remainder of your claim at the end of the Test Case and banks must make up the difference.

  If you’re not going to negotiate the offer, then Step 4: Fighting on explains what to do next.

• It offers a partial refund and pays it into your account

  This is a tactic some banks have used. By paying the money in, most people are reluctant to give it back, and it looks as if it’s a settlement. Assuming you’re not happy to just leave it there – which you may be if it’s a decent amount, you need to officially tell the bank so, as soon as possible, in writing, and keep a copy of it.

  In the letter say you acknowledge receipt of the money “without prejudice”, but only consider it “a partial settlement, not full or final settlement and I intend to continue with my claim, including going to the Ombudsman”. You could also include what further amount you will accept.

• It says any refund needs to be used to pay off your balance

  If you have an overdraft, or possibly other debt with the bank, it may say it will use the money to pay off the debt instead of sending you a cheque. The FOS has said this is generally ok as it would ask the bank to put the consumer back in the position they were in before getting the charge, but if by the bank doing this you are still left in hardship eg you have mortgage or utiltiy arrears, tell it.

  If it doesn't budge read Step 4: Fighting on to see what to do next.

• The bank rejects your claim

  This is very common, and you mustn’t let it worry you. Bank rejection is often part of the plot. Remember, this is a negotiation, and...

  Its letters may be authoritative and seem like you’ve no chance. That’s to try and put you off. Don’t let it. Don’t believe it.

  By doing this, they succeed in stopping many people going on to the Ombudsman, as people give up, and that’s the whole point.

  The Ombudsman has even complained to the regulator about banks using this tactic in reclaiming, by deliberately rejecting people's claims it knows it should pay, in the hope they won’t take it further. It’s also said almost half of people who had an unresolved complaint were deterred from pursuing it further because firms involved had an “unhelpful approach”.

  At this point it’s worth letting your bank know you’re not going to give up easily. It’s worth writing AGAIN to the bank to warn it you’re carrying on and going to go to the Ombudsman, the official dispute handling body. This may make it settle.

  Below are template letters for you to use if you want to negotiate further with your bank:

Yet if none of that works, and you’ve come to the end of your tether with your bank because it hasn’t offered sufficient, or any, compensation, or doesn’t accept you’re in financial hardship, then as Kenneth Williams might have said… Carry On Reclaiming.

Step 4. Fighting on…the Ombudsman

The next step for most people is to use the totally free Financial Ombudsman Service, which handles disputes between consumers and their bank or building society.

You may also be at this stage if you’ve run into hardship since the Ombudsman suspended your original claim or you didn’t argue you were in financial hardship originally as you didn’t know about the rule.

The Financial Ombudsman Service

The independent financial disputes body, the Financial Ombudsman Service, will look at most hardship cases and is completely free to use. It’s nothing like going to court and can all be done simply from the comfort of your home.

When can you complain?

Either wait eight weeks after sending your initial letter to your bank demanding money, or if you’ve received a rejection or final response. Don’t expect an instant judgment, though. It can take weeks or months.

The only slight negative with using the Ombudsman is it may not consider your case until the result of the test case if your bank charges aren’t central to your hardship or if the charges haven’t made things worse. Therefore, assuming it’s true, to help your chances, explain why your bank charges have either been a contributing cause or will worsen your hardship.

How does the Ombudsman work?

Its job is to settle the argument and adjudicate over your case. 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.

Now for the good news, assuming the claim is accepted as one of financial hardship and can be heard now…

According to the Ombudsman, NO bank has contested a bank charge case. Banks simply offer a 'good will' payment without investigation.

This bizarrely means, despite its role as arbitrator, it has yet to rule on the legality of charges in a bank charges hardship case, or any bank charges case, for that matter. So providing you can prove you’re in hardship, and the charges affected the situation, the chances are good.

How to make your claim

If you've already got a claim in with the Ombusdman simply write a letter to say you are now experiencing financial difficulties. Here is a template letter:

If you've not yet contacted it, just go to the Ombudsman and ask it to take on your case either by calling 020 7964 0500 or via the FOS website. You'll need to fill in and post back a copy of its complaint form to explain your case and so it has a copy of your signature.

It’s important you ask for interest as if you were going to court. After all, most banks simply pay out the requested amount at this stage (if you don’t ask, you don’t get). You should also send copies of any previous correspondence you've had with your bank.

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.

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. See the Financial Fight Back guide for other complaints the FOS can help with.

Going to Court

As an alternative option to the Ombudsman, you can go to the courts. This is trickier as they tend not to be as au fait with the requirements of the waiver as the Ombudsman, and are not bound by it in the same way, in fact most information we hear is that there is NO hardship exemption to the court hold.

This means your case may not be heard even if you are in financial hardship. It’s also more costly, though if you win, you will get the costs refunded. For more on this see the court section of the main Bank Charges guide.

If your case was already suspended by the courts

It’s not an easy process to get the case heard although you can ask for the ‘stay’ to be lifted on the grounds you are in financial hardship. To request a removal of the stay, so the judge can look at the case, complete form N244 which you can get from the court, again remember the court is not bound by the FSA exemption. It can cost £75 to remove the stay (though if you’re in hardship this should be waived) and the court may decide to keep your case on hold.

A more successful tactic seems to be trying to remove yourself from the court system and get your case heard by the Ombudsman. However, the Ombudsman can’t hear cases where a judgment’s already been made. The best way to do this is call the Ombudsman on 020 7964 0500 for guidance and see what it suggests.

You may want to discuss your claim in the Bank Charges Court Cases forum thread or read further info on fellow bank charges reclaiming websites such as ConsumerActionGroup, Legal Beagles & Penalty Charges.

Plus further information on this, will be included in the free weekly e-mail and in the Bank Charges News guide.

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.