Last year, the UK Office of Fair Trading decided that excessive credit charges for people who defaulted on payments were unlawful (see http://www.oft.gov.uk/Consumer/Money/default.htm). But the ruling can also be interpreted to include bank charges for customers who go overdrawn and loan companies who charge too much for missed payments. It didn’t attract a lot of publicity at the time and still doesn’t, but people who know about the ruling have been using it to get their cash back – including me.

The banks could test the ruling in court but have so far been reluctant to do so – it’s a lot easier to just pay back the money to any customer who asks in the right way - and presumably they hope there won’t be too many of us asking for our money back. I only heard about it through a contact who works for a bank in the relevant department that was processing these claims, who sent me the right address to send my claim to and pointed me in the direction of the OFT website.

A quick search on the web found me a template for setting out my claim and a draft letter (see below). It takes a bit of time and effort. I have internet banking and could go back six years in statements. I went through them all and listed on a spreadsheet the date and amount of every charge made by the bank – sometimes as much as £150 a month by the time they’d bounced a couple of payments and charged me for every letter. But it was worthwhile. HSBC didn’t question any of my figures and paid back the full amount (over £1800).

I can’t tell you how welcome that cheque was either. Bear in mind this claim followed years of my family struggling to make ends meet on one salary while my partner was at university. Scraping by on what we had coming in only to have a payment get missed because there wasn’t enough cash in, and then the bank charges for telling us that would push us into the red. It was a vicious cycle – skint, get charged for being skint, get more skint because of the charges. And the charges never came out straight away, they always seemed to be at the end of the month, before pay day when the account was pretty much empty so the charges would send us overdrawn.

So finally, I got the spreadsheet of charges together, copies of bank statements and the covering letter by special delivery to the address I’d been given, chased it up a couple of days later to make sure it was logged in the system, and waited. Just before Christmas I got a reply from the bank to say they were investigating and, joy of joy, just after Christmas I got a letter to say they would pay the lot in full and final settlement – but still denying that their charges were excessive.

At some point the banks will start getting anxious about people claiming back this cash and close the loophole, but until they do – check your statements and ask for every last penny back. You’ve got nothing to lose but a few hours of your time.

GOOD LUCK!

Viridis.

Sample letter (there are several versions around online, this is the one I used):

Request for repayment of charges

I am writing to ask you to refund to me the charges which you have levied from my account over the last Xperiod.

I now understand that the regime of fees which you have been applying to my account in relation to direct debit refusals, exceeding overdraft limits and so forth are unlawful at Common Law, Statute and recent consumer regulations.

If you say that they are not, then will you please demonstrate this by letting me have a full breakdown of the costs to which you have been put as a result of my breaches, in order to reassure me that your penalties really do reflect your costs.

Additionally, it has now been confirmed that your particularly high level of penalties are considered to be unfair per se by the OFT who reported on the 5th April 2006 and are therefore presumed to be unlawful in the absence of specific proof to the contrary.

I would draw your attention to the terms of the contract which you agreed to at the time that I opened my account. It is an implied term of that contract that you would conduct yourselves lawfully and in a manner which complies with UK law. I consider that your repeated representations that your charges are fair and reasonable are deceptive and that they have deceived me into agreeing to pay them. Your concealment of the true nature of your charges has prevented me from asserting my right until now.

I calculate that you have taken Xamount and have enclosed a full schedule of the charges which I am claiming with this letter.

I hope that you will enter into a sincere dialogue with me about this matter and I am writing this letter to you on the assumption that you will prefer to do this than merely respond with standard letters and leaflets.

I will give you 14 days to reply to me accepting, unconditionally, my request in principle and letting me know a date by which I will receive payment.

If you do not respond, or you do not respond positively, within this time period, I shall send you a letter before action giving you a further 14 days in which to reflect. I believe that these targets are more than sufficient for a large company such as yours with dedicated staff and departments. After that, there will be no further communication from me and I shall issue a claim at the expiry of the second deadline.

Yours sincerely