Reclaiming Unlawful Bank Charges


The first question that you may have in your mind: why you need to think to reclaim bank charges? You are certain that you are wrongly charged by the bank, but you are not sure whether the laws support you to reclaim bank charges, or whether you are right at your place when you go to reclaim bank charges?

Well, you have the answers to all these questions. On 5 April, 2006, the Office of Fair Trading (OFT) concluded that default charges over £12 are automatically presumed to be unfair in terms of the Unfair Terms in Consumer Contract Regulations–it is noticeable here that unfair terms are legally unenforceable. These charges may include late payments on credit cards, unauthorized overdrafts, unpaid direct debits and standing orders, and missed payment fees on store cards and mortgages. So, if you think that you are wrongly charged by the bank, you are entitled to reclaim bank charges.

This does not mean that charges below the £12 limit will never be deemed as unlawful and you can reclaim these bank charges; but the difference is that the OFT will take enforcement action only for charges above £12.

The law behind reclaiming bank charges

The law behind the concept of reclaimed charges is simple to understand–it states that any charges that banks levy on their customers must be proportional to the actual costs they incur. However, most of the time, the set amount of charges levied by the banks are quite in excess than they actually have to incur, and therefore, you are entitled to reclaim bank charges.

If we take an example, an overdraft limit, or a cheque, or direct debit payment bounce has a charge levied by the bank equal to around £30 to £35 a time. This is obviously not in proportion to the cost that the bank has to incur; and moreover, this charge applies even when you go over your limit by a single penny! However, the official words from the courts are still pending, and till then, no certain law can be imposed on the charges levied by banks.

Process of reclaiming bank charges

To reclaim bank charges, you can follow this process:

Spotting unlawful charges

To reclaim bank charges, you need to spot them in your account statement. The charges levied on you that are over and above what an infringement costs the bank can be classified as unlawful. You need to spot such charged levied on your by the bank. You can get the information about these excessive charges from your bank statement.

Banks can provide statements for the past 6 years, but there would most likely be a charge per statement. There is a law however, under the Data Protection Act that allows you to request all transactions within the last 6 years, and can be charged no more than £10 for them. In this case, banks will probably provide the information in statement form.

Writing a money back request

Once you have calculated the excessive charges that have been levied upon you, you need to take the first step in intimating the bank for reclaiming bank charges. You may include all the information and other history that will support your reclaiming bank charges.

Waiting for the reaction of bank

When you send a reclaim bank charges note to your bank, the bank has 40 days to respond, if not you are free to report them to the Information Commissioner for a breach of the Data Protection Act. If they offer a partial refund against your reclaiming bank charges, you can refuse it. You can write again and reclaim bank charges in full amount.

Most of the replies received by the customers about their reclaiming bank charges are the banks stating that the customers are mistaken on this issue and that the charges are lawful–banks very tactfully tend to refuse to pay against your reclaiming bank charges. When you feel that there is no benefit in writing more to bank about reclaiming bank charges, you can move to the next step.

Learn about the court action

To reclaim bank charges when the bank is not yielding to the written requests, you can take initiative for a legal action. However, you need to take care that from now on you will incur the cost of starting a claim. In case your claim is less than £5,000, it will be heard in the small claims court, where you will not be held liable for the bank’s legal costs. It is also a better idea to open a new current account or switching to personal loans when you are trying legal action for reclaiming bank charges, for, the bank may try to close your account with them.

Making the claim

To reclaim bank charges, there are two options: one is to go to the local County Court in person; the second one is to the court system’s Money Claims online service. This feature allows people to make claims from the comfort of their computer, save details as they go along, and pay fees of between £30 and £120 online itself. The second option is simpler for reclaiming bank charges and saves a lot of time for you.

Action taken by bank

By this time, most probably you will get the money for reclaiming bank charges. If the bank does not respond to the demands, you will win by default in 14 days. However, if the bank takes a defense, your case of reclaiming bank charges enters a new step. Though, it is very unlikely that the bank will move for defense. But anyhow, if this is the case for your reclaiming bank charges, you will receive a court allocation questionnaire. You will need to fill it and send it back to the court within a week–you can also choose to send a copy of this questionnaire to the bank. By most chances, the bank will get out of it, and you will get your claim. However, if the bank does not back away at this point, the legal action will result in your winning the case.


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