Fight against the bank continues
By Joanne McClean
The tide eventually appears to be turning against banks and credit card companies who charge their customers excessive and disproportionate default charges for late payments, exceeding their overdraft limits or for “bounced” transactions or cheques. Charges can be as much as £40 per item on a personal current account and even more on business accounts.
Basic contract law is very clear that any charges must not exceed the cost of the breach of contract. In other words, banks can lawfully impose default charges, but these charges must be in proportion to the actual administration costs incurred by them in dealing with your default. This then begs the question “Does it really cost £35 to send you one standard letter?” The answer is probably not, and this has become a hot debate with banks agreeing to repay charges that they have taken from customers in out of Court settlements rather than revealing their true administration costs, and risking the Court setting a precedent as to what is in fact a reasonable and proportionate amount for them to charge.
In a recent case a Norfolk businessman accepted a record out of court settlement of £35,987.94 from Natwest Bank. The charges had accrued whilst he was struggling to start up a small business. This was an exceptional case which highlights the extent of the problem however, more and more ordinary customers are standing up for their rights and challenging banks and card companies with a very good deal of success. The Consumer Action Group estimates on its website, that over £100 million pounds has already been repaid to more than 7,000 disgruntled customers.
In April 2006 the Office of Fair Trading (OFT) carried out an investigation and concluded that credit card companied were overcharging their customers and it suggested that a reasonable amount would be £12.00 per item. The OFT went on to suggest that a similar principal should be adopted by the banks. Whilst many credit card companies have reduced their charges in line with the OFT’s findings, banks have not followed suit.
As a result there are a number of legal challenges currently underway and it looks likely that the Courts will ultimately have to set a figure for what will be an appropriate charge. Even if this were to happen, it may still be possible to reclaim the difference between the amount you have been charged and the amount the Court sets, but this is just hopeful speculation! Until such time as the issues are finally determined MWR are urging anyone who feels they may have been overcharged to check through their bank statements (you can go back 6 years) or to request copies from their banks.
Once you know how much the charges amount to it is simply a case of writing to your bank to ask for your money back. The bank will generally acknowledge your letter within 14 days and tell you how long it will take them to consider your request.
You do not need to instruct a solicitor to do this for you as there are several excellent and free websites on the internet which offer step by step guides, simple interest calculators and standard letter templates. The Consumer Action Group (CAG) who’s website can be found at www.consumeractiongroup.co.uk is one such source of information although there are many.
Alternatively, contact Joanna McClean at MWR on 01772 254201 or by e-mail at joanna.mcclean@mwrlaw.com for a free e-mail information leaflet.
