Bank charges have been a contentious issue for years. Many people believe that it’s unfair for banks to demand so much money in charges – especially if those they are billing are in a difficult financial situation already or if the charges seem particularly excessive.
Banks can charge you for issues with your account, such as a direct debit not being paid because you have insufficient funds in your account or for people cashing cheques that you’ve written that cannot be honoured. Thanks to a rule change in April 2020, one charge that banks can’t now make is for going over your overdraft limit.
In 2009, the Office of Fair Trading (OFT) went to court, claiming that certain charges made by the banks were unfair. The OFT brought the test case against the following financial institutions:
Bank of Scotland
Royal Bank of Scotland
Nationwide Building Society
In round one, the High Court and Court of Appeal ruled in favour of the OFT.
However, the Supreme Court later overturned those rulings. It said:
People knew what the charges were when they signed their contracts
The charges were part of the overall package offered by the banks
That banks were entitled to make the charges laid out in their contracts
Since the Supreme Court ruling, it is much harder to reclaim bank charges than it once was. However, that does not mean you should not try if you think you have been unfairly charged – especially if you're in financial hardship or the charges were disproportionate.
The simple process is quite simple. Here is what you need to do:
Before you approach your bank, it's worth thinking about the potential risks of trying to reclaim bank charges.
The bank can legally close your account at any time. So if you are going to try to make a case to reclaim the money, you may wish to set up a backup account elsewhere just in case.
Challenging your charges will not impact your credit rating, but it could jeopardise your standing with the bank. In extreme cases, the bank may close your account, so think carefully before taking any action.
The ombudsman says you should be given “reasonable notice” before your account is closed, which is 30 days under the Banking Code.
But this would be under normal circumstances. If fraud is suspected or you have threatened or abused bank staff, this would no longer apply.
If possible, go through your old bank statements to spot the charges you wish to reclaim. If you don’t have your old statements, ask your bank in writing for a list of all charges made. The list should include what each charge was for, the date the bank made it and the amount.
Under the Data Protection Act, your bank is obliged to provide a list of account charges going back six years within 40 days, and it may not charge more than £10 for the information.
Don't allow your bank to charge you more for sending full bank statements – you are entitled to the list of charges by law.
Once you have the charges, look out for any penalty charges, like fees for bounced cheques, returned/unpaid items, or previous charges for exceeding your overdraft limit – as opposed to standard charges relating to the running of your account.
If you ask your bank to refund a one-off charge for a missed payment, for example, they may agree to do so - unless the penalised behaviour has happened regularly.
So, it is first worth making a phone call to your bank to beg forgiveness and ask them to take a lenient approach.
Explain what went wrong to cause the slip-up, emphasise that the blunder was a one-off and state what you've done to prevent it from happening again. Then ask if they would consider waiving the charge in your case. Remember to write down the time you called, the date and who you spoke to. Getting names is always a good idea, just in case you need to follow up with something later.
A phone call like this is by far the quickest and easiest way to reclaim your bank charges, and if your bank agrees, then so much the better. But it is unlikely.
If it refuses, you will have to start a more formal process and write a letter to the bank to make your claim.
Insurers, lenders and banks have to follow certain guidelines when they are dealing with complaints, and one of these is that they respond to all complaints within eight weeks of the initial approach.
If calling was unsuccessful, you should follow it up with a formal letter. It's important that you set out the correct information in your letter, so use a template like the one found here.
You should include details about your financial hardship (assuming you are struggling to make ends meet) because these are the only circumstances under which bank charges are routinely being reconsidered now. Otherwise, the bank needs to have made a clear mistake for a successful claim to be made.
If you do not get a response of any kind within two weeks, write again and follow up your letter with a phone call. Don’t be put off if you believe you have a genuine claim even if your bank tells you that the charges are legal.
Calmly stand your ground and insist that it deals with your claim. Specify that you will take your case to the Financial Ombudsman if it is not dealt with satisfactorily. You should ask the bank to respond within 14 days.
The best result here is for your bank to refund your charges. In some cases, it may offer you a partial payment. If you’re not successful you could consider approaching the Financial Ombudsman.
Think carefully before taking this step: the ombudsman will not rule on cases that have no element of financial hardship involved. This is because the courts have greater authority than the ombudsman, and the Supreme Court ruling sets out that the banks have the right to make these changes.
However, the grey area is whether the bank has taken your claim of financial hardship seriously and been sympathetic in its response. The ombudsman will look at all the evidence and decide based on that.
You’re more likely to be successful if you can show you’re struggling to pay for necessities and settle debts and that your income is being eaten up by paying charges, or you’re regularly relying on credit.
If the ombudsman comes back in favour of the bank, your next option is to either give up or take the matter to court.
You should think long and hard before taking this step, however, because once the Financial Ombudsman has sided with the bank, the courts are likely to do the same.
If you are successful, you may get a full refund. But it’s more likely that you’ll get a partial refund, a full refund to pay off your debts with the bank, or another form of financial help, such as a block on further charges for a set time.