How to reclaim unfair bank chargesStep by step

Banks are still raking in money from overdraft charges. Click on the counter below to find out how much the big 8 banks have made since the test case started on 14th January.

Can I claim now?

The banks have been defeated in court in the first part of the legal battle over unauthorised overdraft charges. As a claims made to banks are on hold at the moment (except in genuine cases of financial hardship). Your bank is required to register your complaint and keep you informed about what’s happening with the test case.

However, it costs nothing to claim and if you act now your claim will be in your bank’s system ready to be dealt with if the banks lose their battle with the OFT.

1Claiming made easy

Making a complaint isn’t a complicated process, but you need to make sure you go about it in the right way. There are 2 basic stages:

2How much should you claim for?

You can challenge default bank charges you've paid in the last 6 years

It’s generally accepted that you can make a claim for charges paid on unauthorised overdrafts in back to July 2001 (the 6 years prior to the start of the test case). Unless you've kept all your bank statements for this time, you'll need to write to your bank and ask them to tell you how much you've paid.

Under the Data Protection Act 1998, your bank must provide this information within 40 days. They can charge you an admin fee of up to £10 for this.

Watch out: the bank may try to charge you more for providing copies of your old statements. You don't need these – you only need a computer printout of the unauthorised overdraft charges you've paid. Remember, your bank cant charge you more than £10 for this.

You have a right to this information. If your bank tries to create delays or mess you around, contact the Information Commissioner.

3Fees total - template letter

Contacting your bank to find out how much you've paid in fees couldn't be easier – just use the our standard bank overdraft letter template.

[INSERT TODAY’S DATE]
[INSERT YOUR HOME ADDRESS]

[INSERT THE NAME OF YOUR BANK]
[INSERT THE ADDRESS OF BANK]

Re: Account number [INSERT YOUR ACCOUNT NUMBER]

Dear Sir/Madam,

I request that [INSERT THE NAME OF YOUR BANK] provides me with details of all default charges for unauthorised overdrafts and unpaid direct debits and standing orders I have paid in the last six years.

I understand that [INSERT THE NAME OF YOUR BANK] is obliged to provide this information under the Data Protection Act 1998.

I look forward to hearing from you within 40 days.

Yours faithfully

[SIGN YOUR NAME]
[TYPE YOUR NAME]

4Ask for a refund

Write to your bank, telling them that believe the charges you've paid breach consumer regulations.

Detail the total amount of charges you are complaining about and seek a refund from them.

Refund - template letter

You don't even need to write the letter yourself – just use this template letter.

[INSERT TODAY’S DATE]
[INSERT YOUR HOME ADDRESS]

[INSERT THE NAME OF YOUR BANK]
[INSERT THE ADDRESS OF BANK]

Re: Default charges on account number [INSERT YOUR ACCOUNT NUMBER]

Dear Sir/Madam,

I refer to the charges relating to unauthorised overdrafts [and unpaid direct debits] which have been applied to my account by [INSERT THE NAME OF YOUR BANK], amounting to [INSERT THE FULL AMOUNT OF THE BANK CHARGES].

These charges are unfair and unlawful and I require the bank to repay these charges to me.

It’s my case that under the Unfair Terms in Consumer Contract Regulations 1999 (the regulations) and/or the law of penalties, the charges applied to my account are unfair and unenforceable. I would draw your attention in particular to schedule 2, paragraph 1(e) of the regulations, which provides that a term may be unfair if it has the object or effect of requiring a consumer who fails to fulfil his/her obligation to pay a disproportionately high sum in compensation. In this instance, the bank has charged me amounts which are disproportionately high in relation to any expense which the bank may have incurred as a result of my use of the account.

The amounts charged by the bank are also penalty charges, which are extravagant and therefore unlawful. Alternatively, if the charges, or any single charge, are not charges for breach of contract, they are, nonetheless, unfair and so not binding under the regulations.

I am aware of the decisions of the county court in the Berwick case that certain charges related to borrowings which the bank had in fact agreed to, and that, as those charges were not charges for breach of contract they were therefore exempt from challenge under the regulations. I am also aware of the decision in the Gillin case.

In both the Berwick and Gillin cases, the court did not consider the House of Lords case of Director General of Fair Trading v First National Bank plc 2002. This case means that an ancillary provision, such as a provision for certain charges to be made for unauthorized overdrafts, is not a term that may be exempt from the assessment of fairness under the regulations.

Further, no term will be exempt from an assessment of fairness under the regulations unless it is expressed in plain intelligible language. The terms governing the penalty charges in the bank’s terms and conditions are not expressed in plain language and are therefore subject to an assessment of fairness by the court.

I therefore ask that you repay the amount of all the charges and additional interest charged for unauthorised overdrafts [and direct debits] and the interest that has been charged upon these charges and any compound interest charged. I look forward to receiving your response within a maximum of eight weeks of the date of this letter or I will issue proceedings with the Financial Ombudsman Service to reclaim the full amount of charges.

I am happy for you to contact me on [INSERT YOUR TELEPHONE NUMBER] to discuss the matter.

Yours faithfully

[SIGN YOUR NAME]
[TYPE YOUR NAME]

What happens next?

If and when the banks will have to pay up is down to the outcome of a court case.

5Are the fees unfair?

In April 2008 the banks lost their test case against the Office of Fair Trading (OFT) over whether unauthorised overdraft charges can be assessed for fairness. The banks are appealing the decision, but the OFT is now looking at the fees to decide whether they are unfair.

If the OFT decides the charges are disproportionate under the Unfair Terms in Consumer Contracts Regulations 1999, it will open the door to bank customers getting compensation for fees they have paid in the past.

6Banks can still charge you

While the case is in progress, the Financial Services Authority (FSA) has allowed the banks to keep charging their existing fees, while stopping complaints progressing with the banks.

The Financial Ombudsman Service has also put complaints on hold and most county courts have suspended bank charges cases.