Is Lloyds TSB flouting the bank charges hardship rules?

If guilty, the bank would be breaking a condition of the waiver granted to providers by the Financial Services Authority (FSA) that allows them to sit on most overdraft fees complaints, pending the outcome of a landmark test case to determine the fairness of charges.

The condition is they must consider complaints from those in financial difficulty in the meantime (see the Bank Charges Hardship guide, which includes a step-by-step reclaiming guide and free template letters).

MoneySavingExpert.com has already received a string of complaints from those in the financial mire who claim Lloyds, part owned by the taxpayer, is stating it will not hear their complaint until the end of the court process. A result in the case is not expected until later this year at the earliest.

The main charges against Lloyds are that it is often denying its customers are in hardship when they argue otherwise, and that it is failing to properly investigate whether a current account holder is in financial difficulty in other instances.

If banks break the waiver conditions, the Financial Services Authority (FSA) has the power to re-open the reclaiming floodgates for all.

'Firms not doing enough'

One angry Lloyds customer who has had to cut his hours at work due to a major heart problem, and has to support a partner and five children on his reduced wage, was told by the bank it does not consider him in hardship.

He and his partner have been on a debt management plan, and they say they are in arrears on important bills, and are struggling to meet other basic necessities.

Another Lloyds current account holder who had a huge wage cut, is on benefits and has had debt help from a local Citizens Advice Bureau, has also been told his case is on hold.

The two stories are detailed below.

The Financial Ombudsman Service, which handles complaints against financial institutions, says it is seeing a steady increase in the number of complaints from consumers who say their provider is not dealing with their bank charges hardship claim.

It gets around 350 complaints a week. Emma Parker, a spokeswoman for the Ombudsman, says: "Some firms are not doing enough to investigate whether their customers are in hardship. However, consumers also need to make it clear they are in hardship. Sometimes, this does not happen."

If Lloyds or any other current account provider has ignored your bank charges hardship claim, please get in touch so we can investigate. See the Bank charges hardship forum post for contact details.

FSA rules

The regulator's rules on hardship claims are very clear. The FSA states: "A firm must ensure a fair, consistent and intelligent filtering to identify complainants who claim to be in financial difficulty and then assess whether that claim is justified.

"A complainant is considered to be in financial difficulty when his/her income is insufficient to cover reasonable living expenses and meet financial commitments.

"The FSA would expect to revoke this direction (the waiver) at any time if the firm is not complying with the conditions set out in this direction."

There have been calls from major political parties over recent weeks for swift compensation for bank charges victims in the face of mounting public anger at the hold on charges reclaiming which has been in place for over two years (see the Tories pledge bank charges paybacks and Lib Dems to table automatic payback motion MSE news stories).

Over 6.2 million free bank charges reclaiming template letters have so far been downloaded from this site alone which shows the strength of the reclaiming movement.

You can still make a claim if you're not in hardship to get your place in the queue (download a template letter from the Bank Charges guide if you're not in hardship).

Martin Lewis, MoneySavingExpert.com creator, says: "This is a worrying development. The hardship exemption was specifically added to the agreement allowing banks to put reclaiming on hold, so the most vulnerable wouldn't be disadvantaged and they could get money back without delay."We are asking anyone who's had their claim for hardship ignored to come forward so we can see whether this is just poor bureaucracy or a systematic approach to wriggle out of paying.

"Either way, it simply isn't good enough and has left many living below the breadline due to unlawful charges. The fact most case histories are with a sizably Government-owned bank makes it even more disturbing."

Complaint rejected - part 1

Gary Templeman and his partner Wendy Smith got in touch with this site after a succession of rejected complaints by Lloyds.

Gary, from Hull, is reclaiming almost £1,000 in charges on his current account and told Lloyds he is in hardship last November.

He has had to cut his hours at the water company he works for because of major heart surgery. He and his partner Wendy are over £3,000 in arrears on rent, council tax and energy bills. They have also been put on a debt management plan by a third-party firm.

Gary sent Lloyds an income and expenditure form, while the bank has since put his account on a special repayment plan because he is behind on payments.

Lloyds added £165 of charges last month because it says Gary broke the conditions of his plan.

Lloyds does not consider him to be in hardship.

He has since taken his complaint to the Ombudsman, which has yet to rule either way.

Wendy, now a full-time student, says: "It is a struggle because of Gary's wage. We can't go anywhere and it's difficult when buying the kids' clothes. I can't understand why Lloyds TSB is behaving like this as we are clearly in hardship."

Complaint rejected - part 2

Another angry Lloyds customer is Michael, from Newcastle, who does not want to be identified by his full name.

He began his complaint over a year ago, arguing hardship, but he has been told to wait until after the test case to have his claim heard. Lloyds has yet to determine whether or not he is in hardship 12 months on.

One letter to Michael from Lloyds says: "You say you fit the financial hardship criteria. Please be advised we recognised this and we have referred your details to our Customer Support Unit.

"We appreciate you may have wanted to have your complaint dealt with more quickly but we assure you your complaint will not be disadvantaged whilst the case continues."

Lloyds originally said it had not been able to contact the customer to determine whether he is in hardship, yet Michael disputes this.

Lloyds, after further investigations, realised Michael had made contact to try to prove he is in hardship but he had written to the bank's complaints department, not the specific hardship unit.

That's why, it says, its response did not seek to establish whether he is in hardship and simply told him to wait until after the test case.

Michael says: "I was living near destitution, had bills and arrears up to my neck. Their letters make no sense and beat around the bush to the extent it is laughable."

A Lloyds spokeswoman says: "We are committed to doing everything we can to make sure we are clear and transparent in our dealings with customers and we take this aspect of our relationship with them very seriously.

"We constantly review our communications with customers to ensure this, and have committed to reviewing our letters again in light of these enquiries.

"It is crucial customers discuss their finances with a member of staff who has the experience and training to assess their situation accurately."