First of all, it's important to understand that you can reclaim unfair credit card charges now. The FSA has allowed the banks to put all claims for unfair bank charges on hold - BUT this doesn't apply to credit card charges. Here’s what you need to know
What is the problem with credit card charges?
The idea of charging people an administration fee when they miss a payment or go over their credit limit is, in essence, perfectly fair. However, the Office of Fair Trading found in 2006 that charging £35 to send out a letter is not in proportion with the cost of actually sending the letter – which is an automated process. Charging so much for something that costs so little amounts to a fine, which is not allowed under consumer law. The OFT said it would not investigate any charges of less than £12 – so in effect charges of above £12 are deemed ‘unfair’ and can be reclaimed.
Can I reclaim charges now?
Yes, claims for credit card fees can be processed now – they are not covered by the ‘hold’ put on bank charges claims by the Financial Services Authority.
OK, so how do I claim?
Although less well publicised, the process of claiming back credit card charges is very similar to that used by people reclaiming bank charges.
Here’s what you need to do:
1. Stick to your guns:
Credit card companies don’t like giving money back, so will try to put you off, even using the hold on bank charges as a reason to delay your claim. Don’t let them get away with it – they have to deal with your claim now, one way or another.
2. Work out what you could reclaim:
If possible, go through your old credit card statements to spot the charges you may be able to reclaim. Normal interest charges and account fees are not part of the issue, so look out for any ‘penalty charges’ like late payment or ‘over the limit’ charges. If you do not have your statements, don’t worry. You can request under the Data Protection Act that your credit card provider gives you a list of charges going back six years. Write to your provider to ask for a list of all charges, detailing what the charge was for, the date and the amount, under the Data Protection Act. Your provider is obliged to reply within 40 days and may not charge more than £10 for the information. Don’t allow your credit card company to charge you more by insisting that you pay for a full statement – you are entitled to this information in law.
3. Get a back up card:
If you use your credit card regularly it is worth getting a back up card from a different provider before going ahead with your claim. Some companies will cancel your card as soon as they pay out, so having a back up will ensure you are not left in the lurch. To check out the credit cards currently on offer visit the money.co.uk credit card comparison tables.
4. Write again to your credit card provider, this time asking for your money back:
This should be your first move, but it’s important that you set out the correct information in your letter, so use a template like this one.
5. How much should I claim?
This all depends on how far you want to go. You can either ask for the difference between the actual charges and the OFT ‘acceptable charge’ of £12 to be refunded in each case, or you can simply ask them to refund the whole lot. Remember though that providers are more willing to pay out on ‘difference’ claims, so if you want to take the easy route, asking for a refund of anything over £12 per claim is for you. Having said that, plenty of people have succeeded in claiming back 100% of fees, especially those incurred prior to the OFT report in 2006 – mainly because the credit card companies are not keen to justify their fees in court.
6. See how your credit card provider responds:
If you don’t get a response of any kind within two weeks, write again and follow up with a phone call. Your provider may try to bluff by saying that the charges are not illegal. Again, don’t be put off – stand your ground and insist that your claim is dealt with. The best result here is for your provider to simply refund your charges, or in some cases, offer you a partial payment. If you are offered a partial payment, then you need to decide whether to accept it or fight on.
7. What if my credit card provider refuses to acknowledge my claim?
At this point it is time to think about legal action. Don’t be put off, the process is reasonably straightforward and in many cases the provider will pay up before any hearing can go ahead, or will simply fail to show up in court – either way, you win. The first thing to do is to write to your provider threatening legal action – here’s a useful template letter.
8. Take action:
If your provider still refuses to acknowledge or deal with your claim, it’s time to either take them to court or involve the Financial Ombudsman Service (FOS), which also has power in these matters. If you choose to go to court, you can lodge a claim at the County Court, either in person or online – for more information, visit http://www.hmcourts-service.gov.uk/infoabout/claims/index.htmConsumer Action Group, which is a useful source of information and advice on making a legal claim.
If you choose to involve the FOS, visit http://www.financial-ombudsman.org.uk/consumer/complaints.htm for more information. Remember that it costs nothing to involve the FOS and it is often the best way to get a result. They will simply take on the claim on your behalf, and you still have the option to go to court if you don’t like the results of the FOS’ efforts.
9. Again, see how your provider responds:
In many cases, the credit card company will fold at this point and offer at least a partial settlement – again it’s obviously up to you whether you should accept a partial settlement or fight on for the full amount. If the provider simply ignores your claim for 14 days you will win by default. Be aware that a favourite trick of the credit card companies is to enter a defence at the last minute. This is designed to intimidate you, but don’t be put off – the few cases that the providers have fought and won have usually been down to poor preparation on the claimant's part. If you have followed the steps above, you will have a very strong case.
10. The defence:
According to Consumer Action, it is very unlikely that any provider will go this far. If it does, you will be sent a court questionnaire, which you must complete and return within a week. Do so, and send a copy to your provider, so it can see you are not going to back down. At this point, the credit card company usually sees sense, failing to turn up in court and allowing you to win by default.
11. Getting your money back:
Not surprisingly, the providers are often far slower to give money back than they were to take it in the first place. If your credit card company doesn’t pay up, you have the right to send in the bailiffs. You can do this very easily, via the MoneyClaim website.
12. In future, avoid credit card charges:
The best way to avoid charges in future is to manage your money effectively. Penalty charges won’t go away altogether, though it is likely they will be reduced across the board. To avoid paying fees, avoid missing your payments and going over your credit limit.
