Reclaim bank charges
It's still possible to get £100s back
Excess bank charges are no longer such an issue as many banks aren't charging fees for going over your overdraft limit any more. Yet many people in financial hardship can still reclaim past charges worth up to £100s – joining the £1bn already repaid. This guide runs through whether you might be eligible, how much you could get back and how to make a reclaim, including free template letters.
Mass reclaims are a thing of the past - but you can still reclaim if you're in hardship
Reclaiming bank charges from current or closed accounts specifically for busting your overdraft limit, bounced cheques and direct debits was once an open door. You simply threatened to take a bank to court or the ombudsman, and it sent you a goodwill cheque for six years' worth of charges, plus interest.
However, it's now more more difficult to get fees back.
If you're reading this after a one-off recent bank charge or a charge applied in error, just call the bank and see if it'll wipe it. But if you're in financial hardship or you've had past charges that snowballed, this guide is for you.
Some inspiration before you begin
We continue to receive reports from MoneySavers saying they're getting their money back. Here are just a couple of examples:
I was constantly in my overdraft and more, and never came close to paying it. I tried to talk to the bank, but it was no help at all. After going to the ombudsman, the bank agreed to pay me back over £6,000 meaning so I am now totally debt-free. If it wasn't for you Martin, I would never have been in the position I'm in now. Thank you. - MoneySaver Shaz
Thanks to your advice. I have just received £923 credit from NatWest for unfair overdraft charges. Very happy! - MoneySaver Holly
I followed your online help guide for bank charges. Got £900. Massive thank you. - MoneySaver Emma
Who's eligible to reclaim bank charges?
The key criteria is that you need to prove there's a clear link between the financial hardship you're suffering, and the bank charges. That is, either you were in financial hardship already and they made it worse, or the bank charges put you in to financial hardship. Check if any of these categories fit your situation...
1. You're in financial hardship (or were at the time)
Under both standard banking regulations and the Lending Code (an agreement that all major banks have signed up to) banks must treat you fairly and be considerate if you are in financial difficulty. You'll usually need to demonstrate at least a few of the following to prove hardship...
Can't pay for necessities. You're struggling to meet basic necessities, including your mortgage, council tax, food and utility bills.
Can't pay debts. You're struggling to make loan and credit card repayments.
Income eaten by charges. Your income's being eaten up by repaying charges (for example, you're being asked to pay £50 of charges from a £100 weekly benefit income). Note: This doesn't specifically cover the deduction of bank charges from your benefits under the Social Security Administration Act 1992 – this is an urban myth.
Payments regularly returned. Your payments regularly get returned unpaid as you don't have enough money in your account.
Substantial drop in income. For example, you've lost your job, started a lower paid job, needed to take parental or carers' leave, your partner has died, you've separated from your partner, you've started full-time education or you/your partner has been in, or gone to, prison.
Disability or illness. You've needed to increase spending on something due to a disability or serious illness.
Going bankrupt or into debt management. You're going bankrupt, getting an IVA or debt relief order or are in a debt management plan.
Continually living off credit. You're living off credit and regularly need to increase your credit limit.
Regular credit card cash withdrawals. You're using regular cash withdrawals from credit cards to make ends meet.
Frequently over your overdraft limit. You frequently go over your overdraft limit. In earlier incarnations of hardship rules this was defined as having more than £500 of charges a year – so that seems a good benchmark.
Bank charges have hurt your situation. The charges have contributed to making your financial hardship situation materially worse.
2. The charges are disproportionate (but you need to prove hardship too)
If you unintentionally slipped over your limit by a few pounds and the charge is a lot higher than the ‘offence', eg, you go £1 over but are charged £35.
The FOS stresses these cases are not "black and white" and those who continually slip over their limit, while not in hardship, are unlikely to be successful.
3. You are / were stuck in a cycle of charges
This is known as snowballing. It effectively means you've had charges on charges, so you've been stuck in a trap of not being able to clear charges before new daily or monthly fees are added on top.
This is very common for those with larger reclaims, and is often the reason why some people are being paid back many £1,000s. Of course, it tends to go hand in hand with being in hardship.
Which category do you fit into?
After reading the list above, here's how to decide what's next:
You're pretty sure you fit into these guidelines. If so, follow the route laid out below (ie, go to your bank first, and if that doesn't work, go to the ombudsman).
You think you could fit into these guidelines. If it's touch and go, then it's worth trying the same route as above as it's safest and you've nothing to lose. You are still allowed to go to court if you lose at the ombudsman – though you can't go to the ombudsman once you lose in court.
You don’t fit into these guidelines. In this case, the only option is to go to court, and that means the landscape's radically different. We need to be honest though, we've not heard of anyone actually winning. Success there won't be easy and will involve you using untested legal arguments.
How much can you reclaim?
If you're making a new claim, the first step is to find out how many charges you've had (and can therefore try to reclaim). We're talking about charges and related costs for going beyond your overdraft limit, or bounced cheques and direct debits.
Traditionally these were about £35 per transaction, but now many banks don’t charge fees for going over your overdraft limit any more, and if there are fees, they tend to be much smaller (around £2.75) with limits on the number of times the banks will charge these.
So, with bank charges, these days it’s often a case of reclaiming past charges rather than current ones as charges just aren’t heinous any more.
Bank account monthly fees for packaged accounts are not part of this (but may be reclaimable under different circumstances, see the Reclaim Packaged Accounts guide).
Here's how it works:
- You can make a reclaim even if the account is now closed. There's nothing barring you from trying to reclaim charges if you've since closed the account, even if it was a few years ago.
- You can make a reclaim from more than one bank. There's nothing stopping you trying that. This applies to any current account you've had.
- You can reclaim new charges even if you had a payout before. There's no bar on reclaiming again. However, the fact you've already been through this is a worrying sign of either severe financial problems or money mis-management. Read the Debt Help and Budgeting guides to try to prevent further problems.
- You can reclaim for years back - six years is a good rule of thumb. We're certainly talking years, not months, though there are varying views on how many, and you'll probably be asked to prove your financial situation for the full time you're claiming for. Don't worry if you haven't kept old statements, you've a legal right to access them (see below).
The ombudsman suggests claiming as far back as you like, and it will decide whether or not all or part of your claim can be considered. We believe it's more common than not to only be paid part of your claim, though.
Technically, the ombudsman can only help with claims within three years of when you realised there was a problem, so if you've been waiting, claim now. If you end up in court, normally the Statute of Limitations Act says you can only claim for something within six years of the event in England, Wales and Northern Ireland, and five years in Scotland.
In many ways, this six years is probably a good rule of thumb for putting a complaint to the ombudsman. But if you had substantial charges before that, there's no harm including them.
- You can try to get interest back on top of your claim (but it's not a legal right). If you go to court and win there, you'd be entitled to add 8% flat interest (not compounded) on top of compensation from the date of each charge. Therefore, you may want to ask for the interest as part of the initial claim.
But you're NOT legally entitled to interest, unless you win in court. However, if you do decide to push hard, consider it part of the negotiation process. It may mean you could offer to settle "without interest". Plus the ombudsman's view is it'll consider interest if it's asked for – and may even plump for the interest you were charged by your bank, eg, around 20%. So if you don't ask, you don't get. Here's a calculator to help you work out how much interest you may be able to get on top of your claim.
Do I need my old bank statements to make a reclaim?
Now, let's be honest, how many people have years' worth of statements? If you don't have them, don't worry, you've a legal right to force the bank to give them to you. Before that, there are a couple of things you can try...
Do it online. If you use online banking, check out what's available there first.
Call or write to the bank. Some banks will send you the info if you phone to ask (we've had feedback in the past that sometimes Barclays, Halifax and HBSC have done this).
You can also send a letter to your bank asking for a comprehensive list of all past transactions, including charges (and at this point you may as well try going back for the longest period possible).
Demand your past charges under the Data Protection Act
If the above doesn't give you what you want, you've 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 part of your initial request as banks may stall the process by later writing to ask for the money. Of course the counter is that it may send you the information without charge if you don't include the tenner.
Yet there's one crucial fact here…
Never ask for statements, specifically request a list of charges.
If you do ask for statements you may be charged £10 a time, and over six years that's £720. Yet asking for a list of charges should be fine. Below is a template to help (and MoneySavers in the forum have kindly compiled bank addresses if you don't know yours).
Banks have 40 days to respond to this request. If you have to wait longer, follow up with a phone call and then report it to the Information Commissioner for a breach.
When you receive your transaction list, go through with a highlighter and find all the relevant charges. You should also be able to note what the charge was for and decide why you think it was unfair.
Write to your bank asking for your money back
It's now time to contact the bank and ask for your money back.
If you fit into the hardship criteria above, this is where you use the fairness argument. This is not based on any law, but is about simply telling your story about how the charges have impacted you and caused, or worsened, your financial situation as well as firmly stating you'll take the matter to the ombudsman or court if the bank refuses to hear your case or if it rejects it.
Free sample letters to adapt and send
Feel free to write the letter to your bank yourself, though below we have sample letters for different circumstances that can be used as a base.
Adapt these letters to your circumstances, and delete all the guidance notes. If you're unsure, ask a friend if it makes sense.
Pick the letter that's most appropriate to your circumstances. If you find the letters confusing, then seek any available legal help or speak to advisers at the Citizens Advice Bureau.
Tell your story naturally (and truthfully) and if you fulfil the criteria of hardship do make sure you include points that show it. Here's a short, made up, example...
I lost my job as an electrician in July 2005, and as my wife was ill in hospital at the time things were very tough. Soon we were unable to pay the bills and moved into our overdraft and beyond it. We then started to be hit by charges of £35 a time, which were completely unaffordable. We were trapped, and unable to pay them back.
Tell them about your circumstances, and add any evidence from the time you were in 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.
Select which letter you need. Choose 'Reopen complaint' if you need to tell the bank you are now in hardship or have extra charges to add to your claim, otherwise 'Start a new complaint' is likely to be best for you...
What happens next?
You should get a letter back from the bank acknowledging your complaint. Then it has up to eight weeks to deal with it. When your case is dealt with, there are a number of possible outcomes:
You're offered a full refund
There is a small chance your bank will offer you a full refund as a ‘goodwill payment'. It's more likely to happen if you have a small claim or have provided very detailed evidence on how you've been in hardship for the full timeframe you are trying to reclaim for. If it does… hoorah!
You're offered a partial refund
If you're offered anything at all, it's more likely to be a partial refund as a goodwill gesture, such as around six months of charges, but it should depend on your circumstances. The amount should result in you being treated 'sympathetically' plus be a 'reasonable' amount for your situation.
If you don't think it's enough, call up and ask for what you feel is appropriate – remember this is a negotiation. A quick call saying: "I've had £1,300 of charges, you're offering me £400 – I'll take £800 as it's a fair reflection of my situation." Remember banks have to balance the administration cost of continuing versus clearing this off their books. And you need to factor in your hassle and risk of continuing against getting some cash now.
If you get a refund, let us know in the reclaims success reports forum thread.
It offers a refund but says it should pay off your debt
You may be offered a refund but told it must be used to pay off the debts you currently have at the bank (whether overdrafts or cards). The ombudsman has said this is generally acceptable as it's returning you to the position you would be in without charges (and is still a win after all).
However, if by the bank doing this you are still left in hardship, eg, you have mortgage or utility arrears, tell it. If it doesn't budge, read the next chapter below.
It'll ask you to fill in a financial statement form
If you've told the bank you're experiencing financial difficulties and it's unsure you fulfill the hardship criteria, it may send you an income and expenditure form, or something similar, to complete.
Fill this in and send it back as soon as possible. Include your original letter once again, 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.
Once you've sent that, you could then get another of the results in this list.
It offers to help, but not to refund any charges
Even if the bank has accepted your word that you're in financial difficulties or does so after you've sent in the financial statement, this doesn't mean it has to give you your money back. It just means it has to treat you sympathetically.
It could try to help in other ways, such as not imposing any further charges, rescheduling payments or charges to minimise the impact, stopping any debt enforcement action against you or putting you into a payment plan to manage any debts you have with it. If you're not happy with the offer, read the next chapter below.
The bank rejects your claim
By auto-rejecting even people with reasonable claims, the banks succeed in stopping some people either going on to the ombudsman or taking their claim to court. See below for details on what each means. That's the whole point. Yet whatever it says…
Don't give up. Call up or write another letter to show you're not going to give up easily. This could persuade it to settle.
If your first letter doesn't work, before going further you may want to give the bank a call, or write another letter saying you're going to the ombudsman and you think your case is strong, but would prefer to sort it out quickly. See how that works and carry on if it doesn't.
Rejected? Complain to the ombudsman
If you haven't been able to negotiate a satisfactory settlement with your bank at this point, then it's time to take it to the ombudsman.
As it's free and there are no negatives apart from a few months' wait, it's worth doing even if it rejects your complaint. It's not guaranteed to get you a payout, but the chances of one are greatly increased if you're in financial hardship.
How to complain to the ombudsman
The Financial Ombudsman Service (FOS) is the official independent financial disputes body, 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 – either online or via the post.
The ombudsman's job is to settle disputes and see if your bank has looked at your situation properly. If it accepts your complaint, 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. It's far more common that a settlement is reached without a formal investigation and adjudication, though.
You can't simply go direct to the ombudsman, you must always complain directly to the bank first. Then you need to wait eight weeks from the date you sent your initial letter to the bank – however, if you've received a rejection or final response from it, you can go sooner. Don't expect an instant decision though – it can take weeks or months.
It's a deliberately simple process. There's a specially-designed complaint form that you need to fill in, which can be obtained in two ways:
By phone. Call free on 0800 023 4567 (from a landline or mobile).
Online. Go to the FOS website, you can complain online or download Microsoft Word and PDF versions of the form to fill in.
If you do go for the paper version you'll need to fill it in and post back a copy of the form so it has a copy of your signature. You should also send copies of any previous correspondence you've had with your bank.
What to write on the complaint form
Honestly state what's happened to you, the ombudsman wants to know the effect of bank charges on you from a human perspective – so make it as personal and specific as you can (though it needn't be over-emotional – stick to the facts and the impact).
You can also ask for interest to be added to your claim (eg, the 8% you'd get if you were going to court or the actual interest you were charged by your bank of around 20%). After all, if you don't ask, you don't get.
To help, we've written a guide 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 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.
If it decides in your favour, its aim will be to put you back in the position you would have been in had you not been treated unfairly. This doesn't necessarily mean your charges will be refunded, it may think an alternative solution is more suitable.
Although the ombudsman resolves around half of bank charges cases within three months, some do take longer (between six to nine months).
If you lose at the ombudsman
For many people that's it, you've lost and there are no further routes. You can still go to court using the argument charges are ‘legally unfair' (you can't go to the ombudsman if you've already failed in court though) so this may be an option for some.
You shouldn't undertake this lightly. You'll need to do work and research, and be prepared to turn up in court to argue your point. The arguments are complex and untested and it won't be easy to do. It will almost certainly involve paying a fee and also has a small risk of having costs awarded against you.
The legal argument
In the Supreme Court decision in 2009, the chief judge thought it important enough to say this ruling didn't stop people challenging fairness under Regulation 5 of the Unfair Terms in Consumer Contracts Regulations (UTCCR), which the Supreme Court case did not cover.
We hired a top banking QC to suggest possible new grounds for reclaiming to us but they were just thought papers, and are still to make their full way through court. The first argument uses a different part of the UTCCR, the second a new argument based on the Consumer Credit Act.
While we think the arguments certainly make sense, when the Office of Fair Trading looked at them in 2009, it didn't believe they had a realistic chance of success so wasn't willing to take on another case.
Taking this route is likely to be difficult and there are big risks involved.
Bank charge reclaiming: Q&A
In the past, if you went beyond your overdraft limit or had a cheque or direct debit payment bounce banks would have charged up to £35 a time, even if you were 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 costs between £2.50 and £4.50. And this was being generous.
All in all, we believe this means bank charges were unfair and the banks had no right to grab your cash, which added up to huge amounts over the years.
This isn't just a campaigner's view. Before the shock decision from the Supreme Court, the Office of Fair Trading (OFT) had provisionally said it thought charges were unfair. Maybe going for a principled look at the law rather than looking at individual cases was a tactical error by the OFT.
The loss in the court was down to a legal technicality, which both the High Court and the Court of Appeal disagreed with, that unfairness cannot be decided on price. Maybe they would have ruled differently if they were presented with one of the many thousands of people who slipped into an unauthorised overdraft due to error and got caught in a snowballing spiral of charges.
At the end of the day, is it fair the poor members of society are paying for 'fees-free' banking for the rich?
As for the 'it's in the terms and conditions' question…
Of course, if you had read the terms and conditions when you got your bank account, the charges were in there. Yet that's irrelevant: a contract must be written within the law, and financial services must be fair. Let me use my favourite analogy for this:
If someone told you they were about to punch you before smacking you, it wouldn't make it legal or fair. The same's true with bank charges.
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. People should have the ability to opt out, and they should be structured so that they don't snowball.
No, it can't hit your credit rating and it won't go on your credit file. But the bank you reclaim from can keep its own record, and it may choose not to deal with you in future.
If you are making a hardship claim and are offered some kind of payment plan to manage your account, you need to ensure you check any effect the plan could have on your credit rating.
There's 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.
While in the early days banks closed the accounts of some reclaimers, the ombudsman has ruled against that and the practice has largely stopped. The FCA also 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."
If you really want full belts and braces, it may be worth opening an alternative, or 'parachute', account with another provider before you start (see Best Bank Accounts).
Not at all. Bank charges were introduced as a way to make profit.
It used to be that when you went beyond your limit, the bank simply didn't pay. Then some bright spark decided to set up a new hidden 'paid limit' where if you went beyond your overdraft you could still get money, but be charged up to £35 a time for it. And the UK banks were comfortably making over a billion pounds a year from these fees.
Worse still, the original design was one that trapped people into charges on charges.
One example is of a woman who went shopping thinking she was £50 from her limit. But unbeknown to her, an old cheque from months before had been cashed that day so she was actually at her limit. She bought six items totalling £30-£40, one a bag of carrots for around a quid – and was charged for each – a total of £210. Even if she'd taken cash out and spent the money, it would only have been one charge.
Another is the woman living off benefits as she was a carer for her autistic son. She did not spend more than she earned, and budgeted well. One week the benefits failed to pay, her direct debits bounced and she had a couple of hundred quid worth of charges but no way to repay. A year later charges on charges had snowballed to £3,000. If anyone is stealing money when it comes to bank charges, it's the banks.
For full info on how charges are structured, see How Bank Charges Work.
Some firms may claim this, yet they have no more influence or power than you do – so consider whether you could just cut out the middle man and do it yourself.
For most literate and numerate people with access to the web, bank charge reclaiming at the ombudsman is a straightforward process. 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.
If you need help though, the options are a lawyer or a claims handler, as they're commonly advertised. But they are expensive and at best will take around a third of the money that you're owed. In general, there's simply no need to use another company. This site's stance is that it's easier and more lucrative to use the info above to do it yourself.
Yet there are times when 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, a 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, make sure you...
Never pay anything upfront.
There are some companies who will offer to carry out your claim for an upfront fee. But if the firm isn't open and upfront 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 it's kosher.
All claims companies must be regulated for claims management activities and will have a reference to check (eg, CRM1234) on the Ministry of Justice database. Avoid any not on this list.
Fear not, the Claims Management Ombudsman's able to help with complaints about claims management companies. If you feel as though you've received poor service the process is similar to using the Financial Ombudsman Service.
First, make your complaint to the claims handler you've been dealing with. It has eight weeks to reply, but if it takes longer or you're not happy with its response you can ask the Claims Management Ombudsman to help. Just fill in the form on its website or call 0800 023 4567 (free on mobiles and landline). You must complain within six months of the date on the claims handler's final response to you.
It's free to use and independent and has the power to make firms pay compensation, reimburse costs or provide other forms of suitable redress where it finds there has been poor service. It's also happy to give guidance on how to start a complaint if you give its enquiry line a call. It can also speak to someone else who's helping you, for example a family member or Citizens Advice. You can also ask it a question in the Ask the ombudsman MSE forum thread.
Certainly not. It's worth thinking about the overall result of the campaign.
Even if no one else gets another penny back, 100,000s have already received over £1 billion. Many banks have now lowered their fees, and people have learned banks are there to sell – not to advise – and that they can be challenged.
Even with the poor court result, that makes it the most successful consumer campaign since the poll tax riots. Never mind the fact that both the High Court and the Court of Appeal agreed with the OFT's case.
As well as this site's Bank Charges Forum, where many reclaimers discuss issues, there are also a number of very good smaller free fellow campaigning websites, which are dedicated to reclaiming unfair charges and helping consumers.
The Consumer Action Group is a focused web forum based around reclaiming charges, which is run by a group of people who took on the banks in the very early stages. LegalBeagles followed the test case very closely by sending several representatives to the hearings.
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