Bank Charges Reclaim News

Q. What’s the result of the test case so far?

A. In April 08 the High Court judge, Mr Justice Andrew Smith, confirmed what bank charges campaigners have been arguing for two years; that consumer contract regulations, known as ‘Unfair Terms in Consumer Contracts Regulations’ DO apply to bank charges, meaning 'fairness' counts.

The banks were given leave to appeal this decision to the Court of Appeal, who confirmed on 26 February 2009 that it agreed with the High Court’s decision; a massive step for reclaimers, meaning the sorry position is close to ending.

Though sadly it’s not the end of the line yet. So far the courts have been deciding whether the laws covering fairness apply to bank charges, not whether they ARE unfair. Campaigners have always said that a £35 charge for going a couple of quid beyond an overdraft limit isn’t proportionate.

While the banks have tried to argue that it is, their real hope has been the argument that ‘charges don’t have to be proportionate, as those laws don’t apply’. What the court has now decided throws that argument out of the window; bank charges should be fair.

Interestingly the Court of Appeal also decided NOT to grant the banks permission to appeal to the House of Lords (the next highest court), although it has since given the banks permission to appeal the decision directly.

Now all that's left is for the OFT to decide whether charges are unfair and to see what the House of Lords decides later this year.

Q. What is the OFT doing now?

A. The OFT is deciding whether it thinks charges are actually unfair. It confirmed after the Feb 09 Court of Appeal judgment:

“We’re now analysing the implications of the judgment for our ongoing investigation and have already written to the banks with provisional view on the fairness, setting out concerns that they may be unfair. We expect to reach a final decision on fairness later this year.”

This is strong evidence it will come back saying charges are unfair, and therefore try and agree a remedy with the banks. If they don't come to an agreement though, sadly it will be back to court.

Although the OFT’s investigation into the fairness of bank accounts started in Sep 06, it has yet to reach a decision on the fairness of charges. In Aug 08 it wrote to banks with its provisional views on their fairness yet we’ve still not been told the details.

In the meantime it has released a report into personal current accounts which says the market is ‘not working well for consumers’. Although it does not specifically effect the test case the report gives us more of an idea on what the OFT is thinking, and concretes the fact that there's no competition on charges; people are unaware of what they're paying, the fees bear little relation to the cost, and society's poorest are subsidising the richest.

Q. What will happen to the hold on reclaiming?

A. When the test case was announced in July 07, the regulator, the FSA, issued a one year waiver to the banks, which placed a hold on all reclaiming, allowing neither the banks nor the Ombudsman had to deal with claims.

After the year ended, the FSA extended it, for six months at a time, so now it's due to expire on the 26 January 2010. The FSA has said it will continue to monitor the situation but all cases will remain on hold for the moment.

In August 07 the courts also decided to hold cases and the Court of Appeal judges have said all county court cases should be left on hold until we've heard from both the OFT on whether it thinks the charges are unfair, and for a decision from the House of Lords.

MoneySavingExpert.com’s view on the hold:

"The extension to the waiver means the bank charges hold has now been in place for over a year and a half with still no end in sight. The FSA's decision is a further kick in the teeth for the 100,000s of consumers still waiting to claim back unfair charges. It looks like the banks' delaying tactics are working."

"People are still sitting on their hands, unable to try to reclaim money which was taken from their accounts without their permission, while the banks continue to make £100s of millions in charges. But how long are people expected to wait? A further year? Until it goes all the way to the European Court? With the economic slowdown, the credit crunch, inflation and house prices falling, this hold adds to the woes."

Q. If it's still on hold, why put in a reclaim now?

A. It’s important to get a marker in as soon as possible, and there are three distinct reasons for this…

i. Get in the queue

It’s estimated there are already over a million with cases on hold, so when the floodgates do open, the further ahead you are in the queue, the sooner your claim will be processed.

ii. Things change

The law is a strange thing. At the moment there is a precedent binding on lower courts that ‘bank charges are covered by unfair contractual terms rules’. The leave to appeal does not impact this, the law is the law.

So hopefully, the hold will be lifted soon, and people may be able to try to reclaim again. Yet in the future, there is a chance things will change, a subsequent appeal could overturn a ruling; and as the decision is currently in reclaimers favour you should get your claim in now.

iii. Claim back as far as possible

The statute of limitations says you can only make a court claim for six years' worth of charges in England, Wales and Northern Ireland, five in Scotland. Therefore, on the surface there’s a worry that if you don’t get your marker in sooner, and you’ve got old charges to reclaim, you will miss the opportunity.

Yet the regulator, the FSA, has said it ‘stopped the clock’ on 27 July 2007, when it first put the hold on reclaiming and that this has frozen any ‘time bars’. This doesn’t have any power in the court, but the banks have agreed not to complain about time limits if a case goes to court, and judges in England, Wales or Northern Ireland shouldn’t consider the issue unless the banks request it (it’s slightly different in Scotland as judges there can consider time issues themselves).

Yet as this situation has never happened before, we do not know how it will pan out in court. As such, while hopefully things will run smoothly and this won’t be an issue, for belt and braces safety, assume the clock is still ticking.

Plus a final note from me. If you’re reading this now, you’re interested in the issue and feeling in the mood to act, often with anything to do with money, apathy can play a part, so to throw in an old cliché… strike when the iron’s hot… and while you’re in the mood! It only takes a few minutes to start a reclaim, and then it's just a question of sitting back to twiddle your thumbs, so there's nothing to lose.

To put your claim in read the step-by-step Bank Charges Reclaiming guide, including free template letters.

Q. Where can I see information on the test case myself?

A. The OFT should regularly update its Personal Current Accounts page with details of its investigation and the test case progress. You can also read each of the judgments although, as they are very long, the following is the conclusion of the Feb 09 judgment:

"For these reasons we agree with the judge that an assessment of the fairness of the Relevant Charges does not relate (a) to the definition of the main subject matter of the contract or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange, within the meaning of regulation 6(2) of the 1999 Regulations. It follows that such an assessment is not precluded by the 1999 Regulations and that the appeal must be dismissed."

Q. How do I keep up to date with what’s happening?

A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.

Q. Can I/should I start reclaiming now?

A. Yes. You can only reclaim the last six years worth of charges (five in Scotland) due to what’s called the ‘statute of limitations’. Technically the date this starts is when you submit a claim to court, though in this unprecedented situation it's possible things will work slightly differently.

Therefore, if your charges are more than five years old, you should send in your claim to your bank immediately. If you have a large number of charges that are between five and six years old, you may also want to be very safe and put in a claim to the small claims court immediately too, though there is always a risk of losing the court fee. Full details on claiming are in the main Bank Charges Reclaiming guide.

The FSA has said that on the date it announced the first waiver, 27 July 07, it 'stopped the clock', so the time out issue won't arise, yet it does not have power over the courts, so for safety it's best to assume the clock's still ticking.

If your charges are within the last few years, you could safely wait until the test case has ended. However as a general rule, the sooner you can get your claim in the better, especially with the huge queue of claims that's building up.

Claims sent to the bank now will be recorded and acknowledged within five days. Your bank will also need to keep you updated on developments in the test case process and deal with your complaint as quickly as possible once the test case has been concluded.

Q. Can I still start a court case?

A. While there’s no problem actually submitting a court claim, the question is: when will it be heard?

The government's Moneyclaim website decided to automatically stay (suspend) all cases submitted online after 13 August 07, where the defendant (the bank) files a defence. Of course the banks are therefore putting in defences and thus they're all put on hold.

This means all new cases started online are very unlikely to be heard until the FSA's stay on cases is over. See the financial difficulties question to see if you may be able to bypass the hold.

This means the main option that's open is to start a claim in your local county court, rather than online. Although some county courts are also putting claims on hold, others are continuing to process applications. Check what your local court is doing.

Yet delay and you may fall foul of the six year statute of limitations (i.e. claims can only go back six years, so you may not be able to reclaim some older charges). If you have charges going back this far, you should put your claim in as soon as possible, either online or at your local court. Although your case will not be heard for a while, it means you won’t miss out on the older charges.

Sadly to put a claim into court will usually involve a small fee (usually substantially under £100) and once this has been paid you cannot stop your claim and ask for the money back (although you do get it back if you eventually win). Also, if you put a claim in now and the banks win a subsequent appeal, you may find that you have paid for a case you won’t win. However in most cases the amount you stand to gain will be more than the fee.

To put a court claim in, see the Bank Charges Reclaiming guide for info and template letters.

Q. Will they still give me details of all my past bank charges if I ask?

A. Yes. All banks are still obliged to give you this information under the Data Protection Act, so you can still write to ask for details of your charges if you don't have the information. See the main Bank Charges Reclaiming guide for how.

Q. What should I do if I have only recently received my first one or two bank charges?

A. Most banks will usually give you one or two ‘free hits’. In other words call up, and politely request the money back. Most times they’ll agree and you won’t have to go through the whole reclaiming procedure.

Q. How do I keep up to date with what’s happening?

Q. What does the latest news mean for me?

A. Until we've heard from the OFT on whether it thinks the charges are unfair, PLUS a decision from the House of Lords, claims unfortunately remain on hold. This is due to the FSA waiver, which effectively placed a hold on all reclaiming (unless you're having financial difficulties) as neither the banks nor the Ombudsman had to deal with claims.

In the meantime your bank should write to let you know what will happen but you don't need to restart your claim; once it's logged, it's logged. Though if you're not happy to wait you can still start a court claim. See the court claims section for more details, and although this could also be suspended, there’s a small chance your local county court will let your claim though.

Q. My bank says my credit card claim is also on hold, what should I do?

A. This is not true. The FSA waiver does not apply to credit cards charges, so you can complain about credit card fees now. Read the Credit Card Reclaiming guide for full details on what to do next.

Q. What should I do if my bank has responded but has not offered any money?

A. If you're not happy with your bank's response, you can still take your complaint to the Financial Ombudsman Service, but it will put your claim on hold until the FSA waiver has been lifted. You can also still start a court claim, see the court section for more details.

Q. What will happen to claims with the Financial Ombudsman Service?

A. The Financial Ombudsman Service has decided, for the time being, not to continue its work on complaints about bank charges except for those in financial difficulties. All cases will be restarted once the FSA waiver has been lifted.

Q. What will happen to claims put to the county courts?

A. The courts may continue to handle bank charges cases, particularly those that were submitted before the test case announcement or online before 13 August 2007, as usual. Unless, one of the two parties involved, in other words the reclaimer or the banks, applies for a stay. However it's almost certain that every bank will apply for a stay, asking that the case isn’t heard until after the final decision.

Yet that doesn't mean the case will then be put on hold; you have a right to object to the stay and argue it should be heard now. There are a variety of reasons that can apply. The most obvious is that by waiting you would be left in undue financial hardship.

Individual judges are likely to react differently to such objections to stays. I’ve no doubt some will allow cases to be heard, while others won’t. It’s likely to be luck of the draw. If your case is heard, the banks may well decide to settle beforehand, so as not to rock the boat before the main test case (where they’ll collectively have their huge legal big hitters).

Sadly, arguing against a stay won’t necessarily be easy, and probably shouldn’t be attempted without detailed research, preparation and an understanding of the court process. Therefore, for most people, the stay will have an impact and your case will be on hold until after the test case.

The wins in Apr 08 and Feb 09 don't change this position as yet. The decision of Oct 08 is of more importance to those with stayed cases however, as most court cases rely on historical contracts, so you could try this route now with a little more certainty.

Q. I already have a court date do I need to attend?

A. Yes. If you have a court date, do make sure you go along to represent your complaint, even if your bank has written to tell you that it has requested your case be stayed. Only the judge can decide if a case is stayed; yours may not be, but if you do not attend the judge will almost definitely 'strike out' your claim, meaning you will need to appeal in order to continue.

Q. I have already won a court case but have not received the money yet. Will I still get it?

A. Yes. Your bank will pay you any money that has already been agreed. If it does not pay, you still have the right to send the bailiffs in to claim the money, the stay on reclaiming doesn’t impact that. See full detail in the Bank Charges Reclaiming guide.

Q. How do I keep up to date with what’s happening?

A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.

Financial difficulties

IMPORTANT! Bank charges reclaiming ISN'T on hold if you're suffering financial hardship; this applies even if your case is already suspended, providing you've since moved into hardship or didn't know to argue it before.

Hardship is when income's insufficient to meet reasonable living costs; yet you can also qualify under specific criteria eg £500+ charges a year or needing to withdraw cash on credit cards.

Full details on who and how to claim, including specially drafted template letters and tools, are now in the detailed Bank Charges Hardship guide.

Detailed background information on the test case

Q. Does the test case affect all types of reclaiming?

A. No. This is very strictly only about reclaiming bank charges. All the other types are still on. Read the full guides to reclaiming credit cards fees, loan insurance, endowments, mortgage exit fees and council tax.

Q. Why did the OFT bring the test case?

A. The Office of Fair Trading announced it was bringing the case to decide the principles of reclaiming bank charges in the High Court using its special powers to have a case heard on legal principle.

Its aim was to gain clarity on whether bank charges for unauthorised overdrafts (which includes bounced cheques or direct debits) are lawful or not. The banks that are party to the case are: Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc (includes Halifax and Bank of Scotland), HSBC Bank plc, Lloyds TSB Bank plc, Royal Bank of Scotland Group plc (includes Natwest) and Nationwide Building Society.

Prior to this, over a million people had had reclaimed charges (see success stories), as the banks had been unwilling to go to court and take an argument.

Q. What legal points is the case deciding?

A. The first stage of the case is to determine if the ‘Unfair Terms in Consumer Contracts Regulations’ (UTCCRs) can apply to bank charges and the verdict has twice been that they can. Now this has been decided it's for the OFT to assess whether it thinks they are actually unfair, but as it's the one who took the banks to court, that seems likely. Then it'll try and reach agreement with the banks, and if not, go back to court. Obviously there can’t really be a time frame on this, yet sadly this could take years!

Q. What happens to reclaiming bank charges in the meantime?

A. The FSA gave banks a waiver from dealing with bank charge reclaiming cases until after the case, meaning they needn’t respond to complaints in the meantime. At the same time the Financial Ombudsman also said it won't look at any cases either. Sadly, these decisions still stand, even after both the High Court and the Court of Appeal verdicts.

The courts didn't follow suit immediately, yet most individual judges have now simply suspended claims put to them. Though there is still a chance some will allow it to go through, especially in Scotland where the law is different.

Rather than doing nothing, this means it’s still very important you put a claim in now as a marker. Full details are in the Bank Charges Reclaiming guide, including free template letters or see the what should I do section.

Q. How long will the waiver last?

A. It’s technically due to end in January 2010, but it's always possible it could be extended again or that if something substantive changes it will be ended early.

The FSA has said it will stop the waiver if it believes it is being abused or is to the detriment of consumers (though I believe a waiver which prevents people getting money that was being paid out to others, is in itself detrimental to consumers).

Q. Does the result apply to past charges too?

A. The Apr 08 ruling was limited to current contacts (those from Nov 07) but a further hearing took place in Jul 08 to look at a sample of the banks' historic contracts (those six years prior to the start of the test case up until the Nov 07 versions used in the first trial – meaning Jul 01 to Nov 07).

The judge announced in Oct 08 that historic bank charges contracts can also be subject to unfair contractual terms rules, as well as current ones. This is a key decision for those reclaiming older charges, especially through the county courts, although it doesn’t change anything straight away.

Q. Wasn't there an argument that charges are penalties?

A. The Apr 08 judgment had two parts; can terms be unfair and are charges fines disguised as a service, so therefore are penalties. On the second point the judge decided in favour of the banks. While, for reclaimers, it would’ve been great if this was decided in their favour too, this was always a two pronged attack, with unfair contractual terms being of primary importance.

The High Court judge also decided that the banks current terms and conditions were in, or largely in, plain intelligible language. Again, this could have been an additional plus if he’d decided they were not clear, yet it’s equally not too much of a loss that he didn’t.

In Oct 08 and Jan 09 two additional judgments were handed down to say that, as with the current contracts, historic contracts - except those for Natwest in 2001 - were also not penalties, which is what we expected to happen.

Q. What is MoneySavingExpert.com’s view on this?

A. It’s estimated the banks now have up to £1bn worth of cases on hold, saving them a fortune in payouts and earning them more money in interest. While the test case has always been welcomed, the effective stall on reclaims is an anti consumer nightmare that rails against natural justice.

Well over a million people have reclaimed or are trying to via this site, and hundreds of thousands more through sites like ConsumerActionGroup; however, as far as I’m aware, none of these consumer groups were consulted before the test case was started. Nor were we consulted before it was extended. It was simply a fait accompli.

The Bank Charges Fighting Fund lawyers continue to monitor the case and look at any legal issues and precedents that can arrive. There was also a petition to number 10 signed by over 70,000 people and the Banks Charges Protest Song, "I fought the Lloyds", entry into the charts in January 2008 hopefully sent a message to the government, the banks and the FSA that we think the charges are unfair.

Q. How do I keep up to date with what’s happening?

A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.

Other specific issues and questions

Q. What should I do if I am reclaiming charges due to a bank error, not due to the fairness of the charges?

A. If this situation applies to you, continue with your claim as it does not relate to the consumer laws being debated. Contact your bank to make this is clear and if it does not help, then refer your complaint to the Financial Ombudsman, which is still investigating other areas of complaint. For details on contacting the Ombudsman see the main Bank Charges Reclaiming guide.

Q. Will I have to pay back any money that my bank has already paid to me?

A. No, regardless of any outcome of the test case. All previous settlements will not be affected, as payouts were a gesture of goodwill rather than a legal agreement. You can keep any money you have already been given. You can also start a new claim for any charges that you have received since your last payout, but this will be put on hold, as with all other new claims.

Q. Will the bank stop adding charges to my account until the test case decides if they are fair?

A. Unfortunately, this is very unlikely to happen but you will be able to ask for them back if the test case finds they are unlawful. Those in financial difficulty may find it easier to get future charges stopped.

Q. Is the law the same in Scotland?

A. Things are a little different in Scotland, as the contract laws are not quite the same. Also, anything decided by the High Court is only persuasive in Scottish law and will not result in a ‘sist’ of proceedings (equivalent to a ‘stay’ in the rest of the UK).

One judge in Scotland has already rejected a bank's sist request saying it is unsatisfactory to delay the case due to waiting for a decision from a foreign court (being England) which does not even guarantee to define the relevant law. This case can be used if you are fighting your own sist.

Whilst some cases are still being suspended, the double win to date means it's even more likely you could get a sist lifted. The campaigners at the Govan Law Centre believe the result of the test case means the sist is no longer valid in Scottish law, and are looking at whether it's possible to remove the suspensions.

There is also discussion on whether tax credits and welfare benefits can be used to pay for charges, read this case for more info if this may apply to you.

Q. Can I still reclaim charges on my business account?

A. Both the Apr 08 and Oct 08 rulings are based on the Unfair Terms in Consumer Contract Regulations. As the name suggests, this only applies to consumers; business customers have previously relied on arguing that charges are penalties. Yet as the judge has effectively decided that banks’ current and historic charges (except those of Natwest in 2001) aren’t penalties this unfortunately put a stop to all business account claims.

I have heard reports that some business claims are still getting through though, possibly on the grounds of a business experiencing financial difficulties or being Natwest accounts opened in 2001, so it may still be worth contacting your bank to make a claim. Report back in the Bank Charges Reclaiming forum if you try this so that others can learn from your experiences.

Q. My bank says my credit card claim is also on hold, what should I do?

A. This is not true. The FSA waiver does not apply to credit cards charges, so you can complain about credit card fees now. Read the Credit Card Reclaiming guide for full details on what to do next.

Q. Will the test case also result in negative effects for consumers?

A. Some people think scrapping bank charges would mean an end to free banking in the UK, yet I don’t think we have free banking in the UK anyway. We have 'fees-free' banking for those in-credit; ask most people with overdrafts if their bank is free? Ask yourself, is it fair that the poor members of society are paying for the rich to have free services?

The current account market is also hugely competitive, two banks offer 0% overdrafts, two pay more than 5% in-credit interest. They're all desperate for business and any bank that levies charges will haemorrhage customers.

And let's put this in perspective, while it's big money for reclaimers, for the banks it’s a fraction of their £bns of write-offs due to the Credit CrunchThe Credit Crunch

This is the name given to the current phenomena that banks and other big financial institutions are struggling to find money to borrow. As they can’t find money to borrow they’ve less to lend out, which means the cost of debt is increasing, and its availability is decreasing. In other words it’s getting more difficult and more expensive to borrow.

There’s a chance after the test case has ended that banks will review their terms and conditions, but they are always doing this anyway and always coming up with new services and ways to charge us for these services. This is the nature of the market, and why this site always tries to stay one step ahead, by helping everyone get the best out of their money.