View Full Version : Unlawful Bank Charges: The Consumer Strikes Back

30th Nov 2006, 14:25
The banks are running scared - finally people are waking up to the fact that the charges they have been paying for years are unlawful and unenforceable.

Apparently Lloyds TSB have set up a dedicated legal department to deal with claims - and they take the case right up to the Court stage - meaning the customer has to stump up over £200 for a Couty Court date, and they then cave in and pay out before it gets to court. They do this in the hope the consumer will be put off, but (afaik) they will refund your Court fees as well when they settle.

You have a legal right to be refunded any and all unfair charges over the period of the last six years (the standard period in Contract law for 'reasonableness'). The bank are required to disclose to you full details of all such charges, although in some cases they are doing so by swamping the applicant customer with paper in order to put them off finding them.

Other banks will charge a £10 fee for which they will send you a full schedule of charges.

When you send the letter requesting the schedule they are required by law (Data Protection Act) to disclose the data to you within 40 days.

If you've been hit by any unfair charges - and the definition of 'unfair' is any charge that exceeds the bank's actual loss for your breach of contract in going over your overdraft limit or bouncing a cheque, generously estimated at £1.50, but for which they charge up to £35, you are entitled to your money back.

The banks will not go to Court to fight the case, because they know they would almost certainly lose, at which point their charges would have been found by a Court to be unlawful and they'd no longer be able to levy them.

This is a standard letter (courtesy of LBC Radio) you should send them, there are other examples if you google:

Dear Sir/Madam,

Ref: account number: (your account number)

I understand that the charges applied to my account in relation to the following (enter details of what charges were for) are unlawful.

When I opened my account I entered into a contract with you, at which time you agreed to act lawfully. The fees you have been applying to my account in relation to the above are unlawful under Common Law, Statute and consumer regulations.

You have taken (enter charges amount here) from me, plus the following in (enter overdraft interest amount here) overdraft interest and I would like to request repayment of this (enter total sum) total sum. I also ask you to ensure any default notices entered against my credit record are removed entirely.

Please repay this money in full and remove any default notices within 14 days. If this is not done, I will begin a claim against you for the full amount, plus interest and my costs.

Yours sincerely,

(Your signature)

See www.consumeractiongroup.co.uk

Good luck.

30th Nov 2006, 14:36
Follow this link for an excellent MS Word Doc which goes into more detail about the law and the correspondence you will have with the bank.


Note that the bank are entitled to close your account and some of them are now doing this, so it's a good idea to have a contingency plan (ie a new current account with a different bank) before you begin.

30th Nov 2006, 14:39
In September I took my bank Lloyds TSB to court and I won back 5491.06 in charges back from them
Its disgusting the amount of profit banks make from charging penalties, its not proportional and its wrong.
The people that helped me are www.penaltycharges.co.uk (http://www.penaltycharges.co.uk) its a free service.

30th Nov 2006, 15:39
Oh and yes Lloyds do take it the whole way they paid up to me the day before the court hearing just to try and frighten me off.............

High Wing Drifter
30th Nov 2006, 17:06
Within the context of free personal current accounts, what is an unfair charge.

Also, I'm with Lloyds TSB, and I have the schedule of charges for all the products I have with them and am updated via the post and internet site (whichever is appropriate).

The possible alternative to my current and very cheap banking, is that I have to pay for every transaction as many continental banks operate. I would rather they recover their costs and make their profit via people who don't mange their accounts terribly well, than pay the extra.

30th Nov 2006, 19:46
Within the context of free personal current accounts, what is an unfair charge.

The context of free personal current accounts is irrelevant. What is relevant is that a penalty charge for a breach of contract is at odds with UK common law and, in the case of consumers, against statue. They are entitled to recover their liquidated losses, the cost of a customer breaching their contract, and nothing else.

. I would rather they recover their costs and make their profit via people who don't mange their accounts terribly well, than pay the extra

It is interesting that you feel you should benefit from subsidised banking off the backs of those who in general are least able to afford the penalty charging systems that banks and other institutions have in place.

In any event, the overdraft interest charges and the unauthorised overdraft interest charges that banks apply are more than enough to recover both liquidated losses and act as a penalty to those who don't manage their accounts well. The charging, of upto £30 in the case of the Lloyds, for a bounced direct debit or exceeding an overdraft limit is what enables the banks to make billion pound profits. Indeed the Office of Fair Trading recently ruled that the charges banks were making on credit cards were unlawful and suggested that in the interim the charges should be reduced, nearly every bank reduced their credit card charges to the suggested OFT figure overnight. Apparently the OFT feel that overdraft charges may also be unlawful but have yet to launch an investigation.

30th Nov 2006, 20:28
Well said SID, I was going to make those points myself but you've saved me the job.

FTR, I've never incurred any of these bank charges but I think everyone who has should do all they can to get their money back because they are unjust, unlawful and hit the people who can least afford to pay them the hardest.

IMHO the banks' activities border on the criminal in these cases. But despite numerous representations from consumer action pressure groups, the OFT and the government have refused to act.

The OFT recently ruled that any charge over £12 would automatically be considered unfair.

When Lloyds TSB said they would charge me £12 if I was late with my credit card payment (in the event I wasn't), they said they'd charge me. They said the OFT had ruled their charges 'fair', which was a blatant lie and a misrepresentation of what the OFT said. I pre-emptively asked them to waive any charge, which they refused to do. I told them that if they charged me I'd sue them for the money.

It is just about arguable that the bank could reasonably justify to charge their actual costs incurred plus a maximum profit mark-up of 100% in line with other what other profit-making businesses charge, which would make a 'fair' charge in the region of £3. Some banks charge up to £35. It's unjust, unlawful and, imho, outrageous.

I think I have paid one late payment fee on a Credit Card over the past 6 years but tbh I can't be bothered to claim it back. If I'd been charged any substantial amount I would take the bank all the way to Court to get my money back.

High Wing Drifter
30th Nov 2006, 22:45
SID 'n' Wedge,

If it cost me just 3 to exceed my limits, I wouldn't regard the limit as a limit. I would just see it a teeny weeny little bit more costly, but worth it for the convenience. I suspect so would most of the country.

I suspect the real problem is the banks giving people the credit to hang themselves leading to being hammered by charges.

1st Dec 2006, 00:02
If the banks simply refused to pay transactions that would lead a customer to exceed their allowed balance then the whole question of charges becomes moot.

The issue of penalty charges in consumer contracts is questioning a lot of conventional wisdoms. For example, the parking penalty charges in private car parks are unenforceable as the cost to the owner of an overstayed ticket is not 100 in the vast majority of cases.

High Wing Drifter
1st Dec 2006, 08:13
I think that is a very good point and not one I really considered. I suspect that the banks are unwilling spend the huge amounts required for their IT infrastructure to support what would be massive volumes of transactions in order to cut off a revenue stream. It used to be that case that CC checks, for example, didn't always communicate with the bank and check your credit, at least partly, for that reason. I'm not sure about Chip and Pin.

If the investment were made, then the cost would be passed on to responsible customers.

Also, that doesn't cover the late payment scenario.

1st Dec 2006, 08:27
Some good info here, but what about how it will effect your credit record and future banking if you were to go all the way and sue the bank? Would fighting against them have any negative impact on how you borrow money or deal with banks in the futue?

Maz :ok:

1st Dec 2006, 09:03
Having taken my bank to court I can say it has not affected my credit rating. I am still being offered credit and the bank I sued have kept my account open and have even given me an overdraft facility.
Nobody minds paying charges when they have gone slightly overdrawn but being charged 35.00 a time is just greedy.
If it was lawful to do this I would not have been given my huge payout, the banks know its wrong. They prey on people that live within a tight budget and who for them every penny counts. You may go overdrawn by 4.00 one month and they charge you 35.00 for going overdrawn and another 35.00 for having an unauthorised overdraft. This then puts you 70.00 in the red, your then 70.00 short for the next month and this can then have a snowball effect which is what happened to me.

1st Dec 2006, 11:03
Within the context of free personal current accounts, what is an unfair charge.

I'm not sure if fairness comes into it, the question surrounds the legality of the charge.

1st Dec 2006, 16:36
what about how it will effect your credit record and future banking if you were to go all the way and sue the bank?

Of course it's up to the banks who they lend money to, but under no circumstances can they taint your credit record for suing them to recover their illegal charges, it would be illegal for them to do that. In fact they must delete any default notices on your credit record that were entered because of their unlawful charges.

Anyway, if your bank choose to withdraw your facilities if you sue them for your charges, there are lots of other banks out there who want your business. Open a 'parachute' account with another bank before you embark on the process of getting your money back.

The banks argue that these charges are justifiable because they provide a service of 'free banking' to their customers, and as businesses they have a right to make a profit. I'd have some sympathy with that view but for the following facts:

1. When you account is in credit they make money out of your money by investing it

2. When your account is in debit they make money out of you by charging interest

3. Every year the banks make huge profits as a result. They don't need the money they make from these illegal charges, and they do very nicely thankyou without them. It's just pure greed at the expense of those who can least afford it.

1st Dec 2006, 17:08
I'm not sure if fairness comes into it, the question surrounds the legality of the charge.

Probably splitting hairs here but it is not illegal to charge a penalty for a breach of contract, it is unlawful if that charge exceeds your liquidated losses (the amount you could potentially loose through a breach).

Some good info here, but what about how it will effect your credit record and future banking if you were to go all the way and sue the bank? Would fighting against them have any negative impact on how you borrow money or deal with banks in the future?

If you take action against them for an unlawful act then I understand that it is against the banking code of conduct to penalise you for doing so.

The banks argue that these charges are justifiable because they provide a service of 'free banking' to their customers, and as businesses they have a right to make a profit.
As far as I know no bank has actually defended these charges in a courtroom so their justification for these charges is irrelevant. If they are so confident in their charging system why have they collectively paid out 4.4 million pounds in out of court settlements to those Consumer Action Group members that have actuallly replied to their survey?

2nd Dec 2006, 18:13
I'm currently after HSBC (:mad: ) for nigh on 2000. I am at the taking them to court stage. Consumer Action Group has all the documents you need to launch a claim.

I'll let you know how I get on.

7th Apr 2007, 11:37

This could be about to get interesting - a barrister is claiming against NatWest for considerably more than the total he was unlawfully charged as a law student (about 2.5K). He is also claiming for 'exemplary' damages (ie punitive) to punish the bank for the profit they would have made from their unlawful charges.

NatWest have already made an offer of about 4,000 which he has refused. If there's no settlement before Friday it will go to court and for the first time there will be a court ruling on the legality of these charges. If he wins, then it's likely all the banks will have to stop these illegal and imho outrageous charges.

Question for the legal experts: My dictionary of law says exemplary damages are only available for torts and not for breach of contract - either the law has already changed or he is looking to expand it with this case? (which would be a bit risky considering if he loses and gets hit with costs he will go bankrupt).

7th Apr 2007, 16:00
Apparently the Bank has cancelled his account and is claiming 'no contest' and will ask for the case to be withdrawn with costs to be paid by the chap. If they succeed he will be bankrupt (and therefore unable to continue as a lawyer . . . ).

7th Apr 2007, 17:20
There used to be a 'frivolous and vexatious' throwout verdict applied in some cases.

Wonder if they'll try for that?

7th Apr 2007, 20:23

Loose rivets
8th Apr 2007, 07:23
And all this is going on while..........


As I posted a few days ago.

It has to be said that I have alway had a favorable response to simply asking for a refund. It sometimes takes more than one call, but I make it clear that I feel the practice unfair. Perhaps small town banking was a benifit. Now, I don't even have the number to my own bank in the UK. Every time a friendly manager gives me his personal number, he gets promoted...or fired.

I have found that there is usually a customer service department that had direct lines. If I need to talk turkey to Barclay's from here for instance, I talk to Newcastle. Nice bunch of girls there...well, they would be wouldn't they?

31st Oct 2007, 19:39

1st Nov 2007, 00:37
think the rulings due in early January, in the mean time "tight as a ducks ar*e" mMartin offers good advice...http://www.moneysavingexpert.com/

Sunray Minor
1st Nov 2007, 12:14

My experience with HSBC, ten years ago now, at a time when I was stuck earning 3.50 an hour, packing boxes, despite qualifications etc:

I asked for my overdraft not to be allowed to go above it's limit, but it was difficult to keep track of my current account level (remember the days when pulling 20 out of the cash machine wouldn't result in an update on your bank balance?). Hence I might go a few pence or pounds over - bang, a month later 20 gets taken off my account for unauthorised overdraft fee. Same would happen if overdraft interest pushed it over the -100 mark. So even if I wasn't over my limit, either the interest or the fee itself would put me there, and thus the cycle continued.

As stated, I was struggling to make ends meet, even temporarily homeless, earning sweet F.A. - 20 was my food for the week.

Pity this apparently only applies to charges within the last 6 years as I would happily claim my 2007/2008 bank charges back. All the more galling when bankers commute business class between London and New York every week.