Unfair and Fair Charges

It is very difficult to read any personal finance related news without coming across something relating to unfair bank charges. But how do you know when a charge is unfair?

Over recent years highstreet banks and building societies have been exposed for imposing high charges on their customers which are deemed unfair.

Penalties have come in all forms and have been recorded as being as much as £39 for going just £1 over and authorised overdraft.

These unfair charges, according to the banks, are there to cover the cost of processing the interaction with the customer. This however, isn't really true as all the banks does is send out a franked letter informing said customer that they have been charged for exceeding their overdraft limit, an action that only costs around £3.50.

The good news is that many people have been successful in reclaiming these charges.

The law

For many, many years, banks have got away with charging customers for overspending, either through exceeding an overdraft, bouncing a cheque or a reversed direct debit.

But, the law associates these charges with a breach of contract. It simply states that the charges must reflect the true costs incurred by the bank, or if they are a fee they must be reasonable for what the customer is offered in return.

As a result of the mounting cases banks have had to deal with, the Office of Fair Trading has stepped in and is currently hearing a test case that will ultimately decide whether these charges are, or are not, fair.

Although, until this hearing, the Financial Services Authority has given banks permission to hold off completing any more reclaim cases.

What you can claim…

• Account misuse fee
• Cheque return fee
• Card misuse fee
• Unarranged borrowing fee
• Unauthorised overdraft fee
• Unpaid direct debit fee
• Unpaid cheque fee
• Unpaid standing order fee
• Exceeding Authorised Overdraft Limit
• Exceeding Unauthorised Overdraft Limit
• Direct Debit/Standing Order/Cheque returned fee
• Irregular fee
• Paid referral fee
• Total charges

…And what you can't

• Cash Machine Withdrawal Fees (ATMs)
• Account Service Charges
• Service Fee/Annual Fee
• Charges related to foreign currency transactions and conversions.
• Monthly account fees on certain type of accounts (such as RBS Royalties)
• Normal overdraft interest charges

How to reclaim

Because the process of reclaiming unfair bank charges has temporarily come to a holt, you can only submit your case to the bank involved and wait for the test case decision.

However, there are some steps you can take to prepare.

First of all you need to gather together bank statements. Now, because you can reclaim bank charges for the past six years you can write to your bank and ask them for this information, which they are legally bound to give you under the Data Protection Act. However, they can charge a fee for this - usually around £10 - a fee which is classed as fair.

If you have access to online banking, however, you can obviously get all of the information you need from there.

Once you have collected all of your information, you need to calculate how much you are owed. Many website now have a tool that does this for you, for example, www.moneysavingexpert.com.

Armed with all of this information, all that's left to do is write a letter to your bank outlining that you have been unfairly charged and wish to claim back the disclosed amount.

You should get a reply from your bank to acknowledge that they have received your complaint, however they will no doubt also say that they don't have to act on any case at the moment following the waiver from the Financial Services Authority (FSA).

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