Unfair’ bank charges revolt
Another round of huge profits for the high-street banks has led to the usual mutterings of discontent this week – and also a huge increase in the number of angry customers demanding refunds for their bank charges. Personal finance writer ADAM AIKEN reports on how some customers have successfully claimed money back from their banks.
It feels like we're in the midst of a financial people-power revolution.
Angry customers are demanding their money back from the banks - and their demands are sometimes for thousands of pounds.
And the best part of it - at least from the consumers' point of view - is that the banks are shelling out refunds for charges as if there's no tomorrow.
With the reporting season for the high-street banks well under way, people's anger over hefty bank charges is likely to increase over the coming weeks. Lloyds TSB yesterday posted profits of £3.71bn, following an announcement earlier this week by Barclays that it made £7.14bn last year.
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The trickle of complaints about unfair charges has become a torrent in recent months, with experts and personal finance websites providing sample letters for consumers to send to their banks.
And with a straightforward threat of court action seemingly doing the trick in most cases, the number of people joining this revolution is set to keep increasing.
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Emboldened by the experiences of others, hundreds of thousands of customers are demanding money back from the banks - some of which charge as much as £39 for unpaid cheques.
Banks tend to reject initial requests for a refunds, but follow-up letters threatening to take cases to the ombudsman or the small claims court have so far proved to be successful.
There has been no legal precedent set on this issue because the banks have so far agreed to settle all claims before they reach court, and it won't be until or unless a court makes a ruling that the somewhat confused scene will be become clearer.
But in the meantime, there seems to be no stopping the ever-increasing army of customers who want their money refunded.
Martin Lewis, of personal finance website Moneysavingexpert.com, said there was a simple reason for this.
“People are seeing thousands of pounds-worth of cash being put back into their pockets. It's as straightforward as that,” he said.
“It's one of only a few ways to get cash into your pocket very quickly, and windfalls are always seen as sexy.”
And Mr Lewis said that this week's news of further massive banking profits had goaded more people into taking action.
“It's estimated that the banks are earning more than £4bn a year from charging their customers, and making profits of £38bn,” he said.
“That means the increase in their profits this year will be £5bn, so the banks could actually return all the money they have made from bank charges to their customers and still have seen an increase in profits.”
The number of people taking action over charges has reached staggering proportions this week. Since Monday, there have been more than a quarter of a million downloads of a templated letter from Mr Lewis's website.
“It is difficult to know the numbers of people doing this. But I launched my article online with the accompanying letter on November 15 last year, and on Wednesday this week we had our millionth download of it,” Mr Lewis said.
Doug Taylor, a spokesman for consumers' organisation Which?, said: “If you go overdrawn by a few pennies, the banks can slap a £30 charge on you. If a couple of direct debits are then unpaid because you are overdrawn, you could charged for both of them, too. So before you know it, you've been charged £90.”
Most people suspect the reason the banks are refunding charges to complainants is because charges have to be proportionate under the Unfair Terms in Consumer Contract Regulations. Experts think banks would find it hard to justify their hefty charges in court.
Mr Taylor said it was unclear what the actual cost was to a bank for returning a cheque, but some studies had shown that it was nearer to the £4.50 or £5 mark.
The Office of Fair Trading (OFT) is looking at the issue at the moment, in the same way it looked at credit-card charges last year.
With credit cards, the OFT did not explicitly state what it believed were fair charges. However, it said that it didn't think it would be in the public interest for the OFT to investigate any charges of less than £12.
The OFT is expected to make an announcement next month or in April about bank charges, and many analysts believe it could again plump for a figure around the £12 mark at being a reasonable cut-off point.
Mr Lewis said the impending OFT announcement was another reason why people should get their skates on and demand their money back now.
“It's possible that future payouts by the banks will be for the difference between £12 and what they originally charged rather than giving customers all their money back, as happens at the moment,” he said.
However, he said what was really needed was some leadership from politicians to set the rules on what banks could and could not charge.
“What's distressing about this is that educated people who use the internet can find it very easy to download letters and see this through.
“But there are an awful lot of people who are not as literate or who have reduced mental capacity who are also in severe debt, and we need something to be done to help those people as well,” said Mr Lewis.
Mr Taylor, meanwhile, said that although Which? would have preferred there to have been no need for a campaign, it was pleased that people-power seemed to be having an effect.
“We certainly welcome the fact that consumers are using their powers of influence,” he said.
“They know it doesn't seem right and they are determined to do something about it.”
GETTING YOUR MONEY BACK
t Set up a bank account elsewhere. It is unlikely that your current bank will close your account in protest, but it's a possibility.
t Work out the charges that have been imposed over the past six years and the interest on those charges.
t Write to your bank and ask it to refund the charges and interest.
t If, as expected, the bank says no, write again - this time threatening the bank with the small claims court.
t If there is still no positive response, you can fill in a court form online. You don't need to go in front of a judge or magistrates. The bank has 28 days to respond. If it fails to respond, you win by default.
t If the bank fails to pay once you have won, send the bailiffs in.
t For more detailed advice on reclaiming your bank charges, visit www.moneysavingexpert.com/bankcharges or www.which.co.uk/bankcharges. As well as walking you through the process, there are letter templates that you can download and then send to your bank.