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CAN’T PAY YOUR BILLS? Make a claim today.
Unfair bank charges claims remain on hold until the court case is resolved and sadly that may not be until the end of 2009. Unfortunately for most people this means their unfair charges claim is either in the queue at their bank, filed with the Financial Ombudsman Service or in the cases pending folder at the county court.
Yet there is still a way you can get your bank to deal with your claim now. The Financial Services Authority (FSA) in July last year – after much lobbying by campaigners – made an exemption to the current stalemate in the form of a hardship rule.
The hardship rule exemption means people in financial difficulty can have their claim dealt with by their bank now. It also means that the FOS will deal with your complaint as normal, exempt from the waiver imposed by the FSA.
The bank charges hardship rule has actually been in place since July 2007 but the earlier draft allowed banks to simply refuse to deal with the claim by refuting the customer’s claims of financial hardship. As a result of the rule being tightened in July 2008, however, banks were forced to process claims made by people in genuine financial difficulty irrespective of the waiver.
The FSAs definition of financial hardship is crucial to your chances of making a successful bank charges claim.
In short, this means you can no longer pay some of your bills, such as utilities, mortgage, loan repayments or council tax.
As a result of the pressure applied by the FSA on banks to recognise genuine hardship cases, people have been successfully reclaiming £1,000s. Between 27 July 2007 and 31 August 2008, there were 68,000 hardship complaints – representing an average of 15,600 every three months. However, after the hardship regulations were revised, there were 29,000 complaints for the three-month period between 1 September and 30 November.
If you fit the above criteria because you are unable to pay some of your bills, then you stand a good chance of reclaiming unfair bank charges under the hardship rule.
You can apply for a bank charges refund even if you have already lodged a complaint with your bank, contacted the FOS or have taken it as far at the county court. You can make a new claim now even if you weren’t in hardship when you first applied.
A word of warning: because you are experiencing financial hardship does not mean the bank is obliged to refund your charges. Some do on the basis of a goodwill offering, while others have refused. Debts.org always take the claim as far as the Financial Ombudsman Service where we have a very good record of winning compensation.
Guidance provided by the Financial Services Authority states that anyone with bank charges of more than £500 per year are automatically considered to be in financial hardship.
Banks have a responsibility to consider each hardship appeal on a case-by-case basis during the waiver period.
Most people with basic bank accounts have a history of financial problems though mismanaging their money. Therefore it stands to reason that if you have a basic bank account, this will increase your chances of receiving a refund.
Proving financial hardship is also easier if you can provide us with:
The legal argument for reclaiming unfair bank charges is based on your terms of agreement with a bank or credit card company. Breaching your credit card contract by exceeding your limit, for example, can incur a charge enforceable by the courts. Critically, however, the sum must only reflect the cost incurred by the finance company. If they sent you a letter informing you of a breach, you are liable for the cost of stationery, postage and labour.
Until recently, credit card companies, banks, mortgage lenders and insurance firms have been charging fees far in excess of actual costs incurred, without opposition. Last year, however, the Office of Fair Trading ruled that credit card companies should not charge more than £12 for default charges.The announcement not only put pressure on companies to justify higher charges, but also underlined consumers’ rights.
Since the OFTs ruling, current account holders and credit card customers have been successfully reclaiming unfair charges from their providers. Section 15 in the Supply of Goods and Services Act 1982, states all fees for any ‘service’ must be ‘reasonable’. Therefore it does not only apply to credit cards and current accounts.
You are entitled to reclaim unfair charges on any of the following:
Whenever you bounce a cheque, exceed your overdraft limit or have a direct debit returned, your bank is entitled to charge you for breech of contract. (See your terms and conditions). What they are not within their rights to do, under s15 of the Supply of Goods and Services Act 1982, is charge you an unreasonable sum.
Bank and credit card charges should reflect the cost incurred by the company for your breach of contract. A returned direct debit usually carries a charge of £30, however the cost to the bank is usually more like £3 if you consider stationary, postage and minimal labour costs. Similarly, credit card defaults usually incur a charge of £25, but again the true cost should be around £12.
Inflated charges are considered unreasonable under the above legislation as well as under Unfair Terms in Consumer Contracts Regulations 1999 and Unfair Contract Terms Act 1977. Knowing and quoting legislation will add serious weight to your claim.
The test case in the high court due to be concluded around Easter, is set to determine if banks can continue with the existing level of charges. A decision against the banks would mean customers can have unfair charges refunded spanning the previous six years. To prevent this from happening, which would also result in the loss of billions of pounds of bank revenue, bank firms have recruited the crème de la crème of legal representatives. Banks and their legal teams argue bank charges are an exception to s15 of the Supply of Goods and Services Act 1982, and therefore fair and legal.
Keep up to date with proceedings at Bank Charges Update.
