Reclaim Your Bank Charges And Find Your Way Out Of The Bank Fee Maze
Telegraph explains how to reclaim bank penalties
You are probably confused about which way to turn when it comes to reclaiming various bank charges. Last week the Financial Services Authority effectively opened the door for millions of homeowners to reclaim exit fees paid on mortgages. But just a few days before, the door appeared to have been slammed shut on the millions of customers trying to claim a refund of their overdraft charges.
Banks have already paid out an estimated £1.2bn to customers who have protested about the hefty charges that are imposed every time they dip into the red. But the banks have called a temporary halt to proceedings, having finally agreed to test the legality of such fees in court.
However, credit card customers are entitled to demand a refund of similar penalty fees, charged each time they miss monthly payments or exceed borrowing limits.
One thing is clear though: the fees that customers now pay on mortgages, current accounts and credit cards have spiralled in recent years, with banks introducing new charges and ratcheting up existing fees.
But if you have lost track of which are excessive fees that you can reclaim, which are legitimate costs you have to pay and which are expensive charges that can be avoided if you organise your finances correctly, the following guide should set you on the right path.
Over the past two years bank customers have reclaimed an estimated £1bn in overdraft charges. Last week HSBC revealed that in the first six months of this year it refunded £120m.
This mass rebellion started after the Office of Fair Trading forced banks to reduce the penalty fees charged on credit cards (see below). It is currently investigating whether similar penalty charges levied on unauthorised overdrafts are fair.
But in the meantime customers have been writing to claim back these overdrafts charges. It appears that in most cases banks have capitulated and offered refunds to persistent complainers rather than mount a formal public defence of such charges. But banks clearly did not anticipate the sheer numbers of people who would apply for a refund.
This free-for-all has now come to a juddering halt. At the end of July the banks finally agreed with the OFT to test the legality of the charges in court. Until this case is settled - which could take as long as two years - all refund claims will be put on hold, whether they are being dealt with by an individual bank, the FOS or the small claims court.
Those who have yet to lodge a claim may not have missed out - much will depend on the outcome of the test case.
But if you have incurred bank charges in the past six years (the maximum period over which you can claim a refund), you may want to lodge a complaint now. Doing this will effectively "stop the clock" and should mean that you can claim back all charges from 2001. If you wait two years before lodging a claim you may be able to reclaim charges only from 2003.
There is a small charge to pay for lodging a claim in the courts. If the test case goes in favour of the banks this charge will not be refunded and your claim will almost certainly be turned down.
Anyone who has a settlement pending or has received a payout should not be concerned by these latest developments.
Those who face the most difficult decision are customers who have been offered a partial refund. If they accept this, they are unlikely to get a refund of the full amount even if the test case rules that such charges are unlawful.
But anyone rejecting a partial refund in the hope of securing a full settlement is gambling on the outcome of an unpredictable court case. If the ruling goes in favour of the banks you will not receive a penny.