Leading bank charges campaigner Martin Lewis has today urged the Financial Services Authority (FSA) to lift the bank charges reclaiming hold after providers admitted their fees are disproportionately high.

A QC for the banks admitted in the House of Lords the fees consumers pay far outweigh the banks' processing costs for dealing with account holders exceeding their overdraft limit.

These charges can be up to £39 a time. Estimates suggest it costs banks just £2. Lewis describes the hold as "plain unfair".

While bank charges reclaiming is on hold for most, those with serious financial problems can still have their claim heard. The process is simple and free template letters are available in the Bank charges hardship reclaiming guide.

Even those not in hardship should get their claim in before the floodgates open. Find free template letters in the Bank charges guide. Over six million template letters have already been downloaded from this site.

Unfair charges

The banks’ admission came during their appeal against an earlier ruling which gave the Office of Fair Trading (OFT) the right to determine the fairness of charges.

The four-day hearing, the latest saga in the long-running bank charges test case, ended last Thursday yet a result is not expected until the autumn. The OFT has provisionally stated it thinks charges are unfair.

The FSA has allowed banks to sit on most bank charges claims for two years pending the result of the case.

Lift the hold

Lewis, MoneySavingExpert.com creator, says: "Now the banks have finally admitted the amount bank charges cost them is a fraction of what they charge, it's time the FSA lifted the hold.

"We are in the outrageous situation of having a binding court decision saying charges are subject to fairness laws, and the banks admitting they're overcharging.

"Yet people can't reclaim charges, but the banks can still levy them. That's not natural justice, it's just plain unfair."

Two-faced banks

He adds: "It's quite staggering. For years, we've been arguing bank charges are unfair as the cost to banks is a fraction of what they charge us. They hotly denied this. I even remember fierce rows with the head of British Bankers' Association on television on this point.

"Yet now in court, it looks like we've seen an about-face. They’re admitting charges are hugely profitable to try and stop the courts ruling against them. This is two-faced and unfair – so par for the course, really."

Jonathan Sumption QC told the Law Lords last week that "free" banking (for those in credit) is subsidised by the fees paid by those who are beyond their overdraft limit.

He said overdraft charges "will exceed by a large margin" the real cost to banks of dealing with "unarranged overdrafts".

Further reading/Key Links

Free template letters (financial difficulty): Bank charges hardship
Free template letters for everyone else: Bank charges guide