Reclaim bank charges

Reclaim bank charges
It’s still possible to get £100s back

Excessive bank charges are less of a concern these days, as many financial institutions have stopped imposing fees for exceeding overdraft limits. However, individuals facing financial difficulties may still be able to recover past charges amounting to £100s—adding to the £1bn that has already been reimbursed. This guide outlines how you might qualify for a refund, the potential amount you could reclaim, and the process for making a claim, complete with free template letters to assist you.

Mass reclaims are a thing of the past – but you can still reclaim if you’re in hardship

In the past, reclaiming bank fees related to overdraft limits, bounced cheques, or missed direct debits was relatively straightforward. Simply threatening legal action or involving the ombudsman often prompted banks to issue a goodwill refund covering up to six years’ worth of charges plus interest.

Today, recovering these fees is considerably more challenging.

If you’re dealing with a recent charge or a fee applied by mistake, your best bet is to contact the bank directly and request a refund. However, if you’re experiencing financial difficulties or have a history of accumulating charges, this guide will provide the information you need.

Who’s eligible to reclaim bank charges?

To qualify, you must demonstrate a direct connection between your financial difficulties and the bank charges you incurred. Specifically, you need to show that either you were already experiencing financial hardship and the bank charges exacerbated it, or that the charges themselves led to your financial distress. Review if any of the following scenarios apply to your case…

1. You’re in financial hardship (or were at the time)

Under both standard banking regulations and the Lending Code (an agreement that all major banks have signed up to) banks must treat you fairly and be considerate if you are in financial difficulty. You’ll usually need to demonstrate at least a few of the following to prove hardship…

• Can’t pay for necessities. You’re struggling to meet basic necessities, including your mortgage, council tax, food and utility bills.
• Can’t pay debts. You’re struggling to make loan and credit card repayments.
• Income eaten by charges. Your income’s being eaten up by repaying charges (for example, you’re being asked to pay £50 of charges from a £100 weekly benefit income). Note: This doesn’t specifically cover the deduction of bank charges from your benefits under the Social Security Administration Act 1992 – this is an urban myth.
• Payments regularly returned. Your payments regularly get returned unpaid as you don’t have enough money in your account.
• Substantial drop in income. For example, you’ve lost your job, started a lower paid job, needed to take parental or carers’ leave, your partner has died, you’ve separated from your partner, you’ve started full-time education or you/your partner has been in, or gone to, prison.
• Disability or illness. You’ve needed to increase spending on something due to a disability or serious illness.
• Going bankrupt or into debt management. You’re going bankrupt, getting an IVA or debt relief order or are in a debt management plan.
• Continually living off credit. You’re living off credit and regularly need to increase your credit limit.
• Regular credit card cash withdrawals. You’re using regular cash withdrawals from credit cards to make ends meet.
• Frequently over your overdraft limit. You frequently go over your overdraft limit. In earlier incarnations of hardship rules this was defined as having more than £500 of charges a year – so that seems a good benchmark.
• Bank charges have hurt your situation. The charges have contributed to making your financial hardship situation materially worse.

2. The charges are disproportionate (but you need to prove hardship too)

If you accidentally exceed your limit by a small amount and find that the resulting fee is significantly higher than the excess (for instance, if you go £1 over but incur a £35 charge), the Financial Ombudsman Service (FOS) notes that these situations are not always straightforward. Those who repeatedly exceed their limits, provided they are not experiencing financial hardship, are generally less likely to succeed in disputing the charges.

3. You are / were stuck in a cycle of charges

This phenomenon is referred to as snowballing. It essentially means that you’re accumulating new charges before you can settle existing ones, trapping you in a cycle where daily or monthly fees keep piling up.

This situation frequently affects individuals with substantial reclaims and is often why some people find themselves reimbursed thousands of pounds. Naturally, this problem usually accompanies financial difficulty.

Which category do you fit into?

After reading the list above, here’s how to decide what’s next:

• You’re pretty sure you fit into these guidelines. If so, follow the route laid out below (go to your bank first, and if that doesn’t work, go to the ombudsman).
• You think you could fit into these guidelines.If the situation is uncertain, it’s advisable to follow the same approach as before since it’s the safest option and carries no risk. You still have the option to go to court if you don’t succeed with the ombudsman, but once you go to court, you cannot appeal to the ombudsman again.
• You don’t fit into these guidelines.In this situation, the sole recourse is to pursue legal action, which will significantly alter the scenario. It’s important to be candid; we have yet to come across any reports of successful outcomes in such cases. Achieving victory in court will be challenging and require you to rely on legal arguments that haven’t been proven in the past.

How much can you reclaim?

When pursuing a new claim, the initial step is to determine the number of charges you’ve incurred, as these are the ones you might be able to reclaim. This includes fees associated with exceeding your overdraft limit, as well as charges for bounced cheques and failed direct debits.

Historically, these fees were about £35 per occurrence. However, many banks have eliminated fees for overdraft breaches, and if fees do apply, they are generally much lower, averaging around £2.75, with caps on the number of times they can be applied.

As a result, when it comes to bank charges today, reclaiming past charges is often more relevant than dealing with current fees, as modern charges are less severe.

Bank account monthly fees for packaged accounts are not part of this (but may be reclaimable under different circumstances, see the Reclaim Packaged Accounts guide).

Here’s how it works:

• You can make a reclaim even if the account is now closed. There’s nothing barring you from trying to reclaim charges if you’ve since closed the account, even if it was a few years ago.
• You can make a reclaim from more than one bank. There’s nothing stopping you trying that. This applies to any current account you’ve had.
• You can reclaim new charges even if you had a payout before. There’s no bar on reclaiming again. However, the fact you’ve already been through this is a worrying sign of either severe financial problems or money mis-management. Read the Debt Help and Budgeting guides to try to prevent further problems.
• You can reclaim for years back – six years is a good rule of thumb. We’re definitely discussing a timeframe of years rather than months, although opinions differ on the exact duration. You’ll likely need to provide proof of your financial status for the entire period you’re claiming. If you haven’t retained previous statements, there’s no need to stress—you’re legally entitled to access them.

The ombudsman advises that you can submit a claim for any period you wish, and it will determine whether all or part of your claim is eligible for consideration. However, it is generally more likely that only a portion of your claim will be approved.

Officially, the ombudsman can only assist with claims made within three years of discovering an issue, so if you’ve been delaying, it’s best to file your claim promptly. In court cases, the Statute of Limitations Act typically allows claims for events that occurred within six years in England, Wales, and Northern Ireland, and five years in Scotland.

This six-year timeframe often serves as a practical guideline for submitting a complaint to the ombudsman. Nevertheless, if you had significant charges incurred earlier, it’s worth including them in your claim.

• You can try to get interest back on top of your claim (but it’s not a legal right). If you win your case in court, you can add a flat 8% interest (non-compounded) to your compensation from the date each charge was incurred. Thus, it’s wise to include this interest in your initial claim.However, you are not automatically entitled to interest unless you win in court. If you choose to negotiate, you might consider settling “without interest” as part of your strategy. Additionally, the ombudsman might consider awarding interest if requested, potentially even at the rate charged by your bank, which could be around 20%. So, it’s important to ask if you want to potentially receive this interest. You can use a calculator to estimate how much interest you might add to your claim.

Do I need my old bank statements to make a reclaim?

Let’s face it—how many of us actually keep years’ worth of bank statements? If you haven’t held onto them, there’s no need to stress. You have the legal right to compel your bank to provide them. But before you go that route, there are a few steps you might want to consider first…

• Do it online. If you use online banking, check out what’s available there first.
• Call or write to the bank. Some banks will send you the info if you phone to ask (we’ve had feedback in the past that sometimes Barclays, Halifax and HBSC have done this).

You might consider writing a letter to your bank requesting a detailed summary of all historical transactions, including fees. At this stage, you might as well request records for the maximum period available.

Demand your past charges under the Data Protection Act

If the information you need isn’t provided through the previous methods, you have a legal entitlement to request it under the Data Protection Act. Banks can legally charge a fee of up to £10 for this service, and it’s common for them to charge the maximum amount.

To expedite the process, consider including a £10 cheque with your initial request. This can prevent delays, as banks might otherwise postpone your request by asking for payment later. However, there is a chance that the bank might waive the fee if you don’t include the cheque.

Yet there’s one crucial fact here…

Never ask for statements, specifically request a list of charges.

If you do ask for statements you may be charged £10 a time, and over six years that’s £720. Yet asking for a list of charges should be fine.

Banks have 40 days to respond to this request. If you have to wait longer, follow up with a phone call and then report it to the Information Commissioner for a breach.

When you review your transaction list, use a highlighter to identify all pertinent charges. Make sure to record what each charge was for and assess why you believe it might be unjust.

Template letter: Data Protection Request

Write to your bank asking for your money back

It’s now the moment to reach out to the bank and request a refund of your money.

If you meet the hardship criteria mentioned earlier, this is where you should employ the fairness argument. While this approach isn’t grounded in any specific law, it involves sharing your personal story about how the charges have affected your finances or exacerbated your situation. Be clear about your intention to escalate the issue to the ombudsman or take legal action if the bank does not address your concerns or denies your claim.

Free sample letters to adapt and send

You’re welcome to compose the letter to your bank on your own. However, we’ve provided sample letters below for various situations that you can use as a foundation.

Customize these letters to fit your specific situation and remove any guidance notes. If you’re uncertain, consider asking a friend to review it for clarity.

Choose the letter that best fits your situation. If you’re unsure about which letter to pick, consider seeking legal assistance or consulting with advisors at the Citizens Advice Bureau for guidance.

Template letters

Start new complaint | Reopen complaint

What happens next?

You can expect to receive a response from the bank confirming that they have received your complaint. Following this, the bank has a maximum of eight weeks to address and resolve the issue. Once they have reviewed your case, several different resolutions might be offered:

• You’re offered a full refund

There’s a slim possibility that your bank might grant you a full refund as a ‘goodwill gesture.’ This is more probable if your claim is modest or if you’ve supplied comprehensive documentation showing that you’ve endured financial hardship throughout the entire period you’re seeking to recover. If this happens… celebrate!

• You’re offered a partial refund

If you receive any compensation, it will likely be a partial refund offered as a gesture of goodwill, typically covering around six months’ worth of charges. However, this will vary depending on your specific situation. The amount should be designed to ensure you are treated fairly and is considered reasonable in light of your circumstances.

If you believe the offered amount is insufficient, don’t hesitate to negotiate. A simple phone call can help: “I’ve incurred £1,300 in charges, and you’re offering £400. I believe £800 would be a more accurate reflection of my situation.” Keep in mind that banks need to weigh the cost of continuing the process against settling the matter quickly. Additionally, consider the inconvenience and risk involved in continuing versus the benefit of receiving some compensation now.

• It offers a refund but says it should pay off your debt

You might receive a refund, but it could come with the stipulation that it must be applied to your existing debts with the bank, such as overdrafts or credit card balances. According to the ombudsman, this practice is usually considered reasonable since it essentially restores your financial situation to what it would have been without the charges, and it’s still beneficial.

However, if this arrangement does not alleviate your financial difficulties, such as outstanding mortgage or utility payments, make sure to communicate this. If the bank remains unresponsive, refer to the following chapter for further guidance.

• It’ll ask you to fill in a financial statement form

If you’ve informed your bank about your financial challenges and they’re uncertain whether you meet the criteria for hardship relief, they might send you an income and expenditure form or a similar document to complete.

Make sure to fill out the form promptly and return it without delay. When you do, include a copy of your original letter, adding a note that you’ve enclosed the requested information. This demonstrates your seriousness and clarifies your request.

After sending these documents, you may receive one of the potential responses listed below.

• It offers to help, but not to refund any charges

Even if the bank acknowledges your financial troubles, whether based on your verbal assurance or after reviewing your financial statement, this does not obligate it to return your funds. It only requires that the bank handle your situation with empathy.

The bank might assist in other ways, such as waiving additional fees, rearranging payment schedules to lessen the burden, halting any debt collection actions against you, or setting up a repayment plan for any outstanding debts. If you’re dissatisfied with the proposed solutions, refer to the following chapter for further guidance.

• The bank rejects your claim

By automatically dismissing individuals with legitimate claims, banks effectively prevent some from escalating their complaints to the ombudsman or pursuing legal action. Below, you’ll find explanations for each course of action. This is the primary objective. Regardless of the specifics…

Don’t give up. Call up or write another letter to show you’re not going to give up easily. This could persuade it to settle.

If your initial letter doesn’t yield results, consider reaching out to the bank directly by phone or drafting a follow-up letter. In this new letter, mention that you plan to involve the ombudsman due to the strength of your case, but you would rather resolve the issue promptly. Observe the outcome and proceed accordingly if the situation remains unresolved.

Rejected? Complain to the ombudsman

If you haven’t managed to reach a favorable agreement with your bank yet, consider escalating the matter to the ombudsman.

Since this process is free and the only downside is a potential wait of several months, it’s worth pursuing even if your complaint is ultimately denied. Although there’s no certainty of receiving compensation, your odds are significantly better, especially if you’re experiencing financial difficulties.

How to complain to the ombudsman

The Financial Ombudsman Service (FOS) is an independent body designed to resolve financial disputes and is entirely free to use. Unlike court proceedings, the process is streamlined and can be conducted from home, either online or through postal mail.

The primary role of the ombudsman is to address disputes and verify whether your bank has appropriately reviewed your case. If your complaint is accepted, the ombudsman will initially approach the bank for a response. Should the bank refuse to settle, the ombudsman may initiate a formal investigation, although most cases are resolved through informal negotiations without the need for a full adjudication.

You cannot directly approach the ombudsman without first lodging a complaint with your bank. You must allow up to eight weeks from when you sent your initial complaint letter before escalating the issue to the ombudsman. However, if you receive a final response or a rejection from the bank before this period, you can escalate your complaint sooner. Be prepared for a potentially lengthy process, as resolutions may take several weeks or even months.

It’s a deliberately simple process. There’s a specially-designed complaint form that you need to fill in, which can be obtained in two ways:

• By phone. Call free on 0800 023 4567 (from a landline or mobile).
• Online. Go to the FOS website, you can complain online or download Microsoft Word and PDF versions of the form to fill in.

If you opt for the paper version, you’ll need to complete the form and mail it back with your signature. Additionally, be sure to include copies of any prior communications you’ve had with your bank.

What to write on the complaint form

To provide a clear and personal account of your experience, detail how the bank charges have specifically impacted you. The ombudsman is interested in understanding the human side of the situation, so be as personal and precise as possible, focusing on the facts and their consequences.

Additionally, consider requesting interest to be added to your claim. This could be the 8% interest rate typically awarded in court or the actual interest rate charged by your bank, which might be around 20%. Remember, if you don’t request it, you might not receive it.

To assist you, we have prepared a guide in Word format. This guide allows you to easily copy and paste sections or print it out for reference while completing the FOS form.

Template letter: Making a new complaint 

The Financial Ombudsman Service (FOS) will provide you with a confirmation that it has received your case and will reach out if additional information is needed. Otherwise, you can leave the matter in its hands, and it will update you with any offers from your bank.

If the ombudsman rules in your favor, its goal will be to restore you to the position you would have been in if you had not faced unfair treatment. This doesn’t necessarily mean that your charges will be reimbursed; the ombudsman might determine that another resolution is more appropriate.

While the ombudsman typically resolves about half of bank charge cases within three months, some cases may take longer, ranging from six to nine months.

If you lose at the ombudsman

For many individuals, this might seem like the end of the road, with no additional avenues left to explore. However, you still have the option to challenge the decision in court by arguing that the charges are ‘legally unfair’—note, though, that if you’ve already tried and failed in court, you cannot approach the ombudsman.

Proceeding with this option should not be taken lightly. It will require considerable effort and research, and you’ll need to appear in court to present your case. The arguments you’ll be making are intricate and largely untested, making the process challenging. Additionally, pursuing this route will almost certainly involve a fee and carries a small risk of having to pay additional costs if the court does not rule in your favor.

The legal argument

In the Supreme Court decision in 2009, the chief judge thought it important enough to say this ruling didn’t stop people challenging fairness under Regulation 5 of the Unfair Terms in Consumer Contracts Regulations (UTCCR), which the Supreme Court case did not cover.

We hired a top banking QC to suggest possible new grounds for reclaiming to us but they were just thought papers, and are still to make their full way through court. The first argument uses a different part of the UTCCR, the second a new argument based on the Consumer Credit Act.

While we think the arguments certainly make sense, when the Office of Fair Trading looked at them in 2009, it didn’t believe they had a realistic chance of success so wasn’t willing to take on another case.

Taking this route is likely to be difficult and there are big risks involved.

Bank charge reclaiming: Q&A

Q – What’s so unfair about bank charges, it’s in the T&Cs?

A – Previously, if you exceeded your overdraft limit or had a cheque or direct debit payment bounce, banks could impose fees of up to £35 per incident, even if you were just £1 over the limit.

The process to handle such situations was minimal—essentially sending a computer-generated letter with a franked stamp. A banking professor’s report suggested that this process cost between £2.50 and £4.50, and this estimate was considered generous.

Overall, it seems evident that these bank charges were unfair, and banks had no right to seize such significant amounts from customers over time.

This perspective isn’t merely the opinion of a campaigner. Prior to the surprising Supreme Court decision, the Office of Fair Trading (OFT) had tentatively concluded that these charges were unjust. It might have been a strategic misstep for the OFT to focus on a broader legal principle rather than on specific individual cases.

The court’s defeat stemmed from a legal technicality that both the High Court and the Court of Appeal rejected—namely, that unfairness cannot be determined based solely on price. Perhaps the outcome might have been different if they had been shown the plight of countless individuals who, due to mistakes, ended up in unauthorized overdrafts and were subsequently trapped in a cycle of escalating charges.

Ultimately, is it just that the less fortunate are shouldering the cost of ‘fee-free’ banking for the wealthy?

As for the ‘it’s in the terms and conditions’ question…

Certainly! If you had reviewed the terms and conditions when you opened your bank account, you would have found the charges outlined there. However, this is beside the point: contracts need to comply with legal standards, and financial services should be equitable. Let me illustrate with my preferred analogy:

If someone told you they were about to punch you before smacking you, it wouldn’t make it legal or fair. The same’s true with bank charges.

No one is suggesting that bank fees should be eliminated entirely, but their current levels are excessively high. A few pounds would be a more reasonable amount. Individuals should have the option to opt out, and the fees should be designed to prevent them from accumulating uncontrollably.

Q – Can reclaiming hurt my credit score?

A – Your credit rating and file won’t be affected, and the reclaiming process won’t impact your credit history. However, the bank from which you are reclaiming funds may maintain its own records and might decide to limit or end its business relationship with you in the future.

If you are filing a hardship claim and are presented with a payment plan, make sure to review how this plan might influence your credit rating.

There is a slight possibility that you could be switched to a basic account or asked to return your cheque book, along with other restrictions on your account. If these changes impede your daily financial activities, you might want to consider opening an additional account. Check out the Best Bank Accounts for options.

Historically, some banks used to close accounts of individuals seeking refunds, but this practice has been largely abolished following rulings from the ombudsman. The Financial Conduct Authority (FCA) also prohibits banks from closing accounts or threatening to do so merely as a response to complaints about unauthorized overdraft charges.

For extra security, you might consider opening a separate, or ‘parachute’, account with a different provider before initiating the reclaim process. For guidance, see the Best Bank Accounts.

Q – Isn’t it just a punishment for taking money that isn’t yours?

A – Bank charges were initially implemented as a profit-making strategy.

In the past, if you exceeded your account limit, the bank would simply refuse to process the transaction. However, someone eventually conceived the idea of a concealed ‘paid limit’ system. This allowed customers to access funds beyond their overdraft but at a fee of up to £35 per transaction. Consequently, UK banks raked in over a billion pounds annually from these charges.

The situation became even worse with a system designed to accumulate charges on top of charges.

For instance, consider a woman who went shopping, believing she was £50 within her limit. Unbeknownst to her, an old cheque had cleared that day, pushing her to her limit. She ended up purchasing six items totaling £30-£40, including a bag of carrots for about a pound. Each transaction incurred a separate fee, amounting to a staggering £210. Had she used cash, only one charge would have applied.

Another case involves a woman dependent on benefits as a caregiver for her autistic son. She meticulously managed her budget and did not spend more than she earned. One week, due to a delay in benefit payments, her direct debits bounced, leading to a few hundred pounds in charges she couldn’t cover. Over the course of a year, these charges compounded to £3,000. In terms of financial exploitation, it is the banks that are the true culprits.

For a detailed explanation of charge structures, refer to How Bank Charges Work.

Q – A company has said it can get my charges back for a fee, is this true?

A – Some companies might suggest that they have unique capabilities, but in reality, their influence or power is no greater than your own. Therefore, consider whether you could bypass these intermediaries and handle the process yourself.

For most individuals who are literate, numerate, and have internet access, reclaiming bank charges through the ombudsman is relatively simple. While it requires some time and effort, the resources provided above should equip you with most of what you need to manage the process independently.

If you find you need assistance, options typically include hiring a lawyer or a claims handler, as they are frequently promoted. However, these services can be costly and, at best, will claim about one-third of the money you are owed. Generally, it’s more effective and financially beneficial to utilize the information provided above to proceed on your own.

That said, there are situations where professional assistance may be appropriate. This includes cases involving complex legal issues, such as those in court, or for individuals dealing with more challenging legal scenarios. It also applies to those experiencing significant financial anxiety, lacking web proficiency, or dealing with mental health issues.

In such instances, it’s crucial to thoroughly research any professional you consider hiring. If you decide to enlist the help of a lawyer or claims handler, make sure you…

Never pay anything upfront.

There are some companies who will offer to carry out your claim for an upfront fee. But if the firm isn’t open and upfront about its fees, which as a rule of thumb shouldn’t be much more than 25% of what you win, then don’t go there. Also feel free to ask for references from other satisfied customers, which it should be happy to do if it’s kosher.

All claims companies must be regulated for claims management activities and will have a reference to check (eg, CRM1234) on the Ministry of Justice database. Avoid any not on this list.

Q – I used a claims handler but I’m not happy, what can I do?

A – Don’t worry; the Claims Management Ombudsman is equipped to assist with issues regarding claims management companies. If you believe you’ve been provided with subpar service, the procedure for addressing this is quite similar to that of the Financial Ombudsman Service.

First, make your complaint to the claims handler you’ve been dealing with. It has eight weeks to reply, but if it takes longer or you’re not happy with its response you can ask the Claims Management Ombudsman to help. Just fill in the form on its website or call 0800 023 4567 (free on mobiles and landline). You must complain within six months of the date on the claims handler’s final response to you.

It’s available at no cost and operates independently, with the authority to mandate compensation, cover expenses, or offer other appropriate remedies when it identifies subpar service. Additionally, it provides assistance on initiating a complaint if you reach out to its inquiry line. The organization can also engage with a representative supporting you, such as a family member or a Citizens Advice advisor.

Q – Was the campaign wrong all along?

A – Absolutely not. It’s important to consider the broader impact of the campaign.

Although no additional funds may be returned to others, 100,000s have already been reimbursed more than £1 billion. Many banks have now reduced their fees, and people have realized that banks are primarily focused on selling rather than providing advice, and that they can be contested.

Despite the unfavorable court outcome, this remains the most successful consumer campaign since the poll tax riots. Both the High Court and the Court of Appeal supported the OFT’s stance, further highlighting its significance.

Q – Where can I get further information – are there other sources?

A – The Consumer Action Group is a focused web forum based around reclaiming charges, which is run by a group of people who took on the banks in the very early stages. LegalBeagles followed the test case very closely by sending several representatives to the hearings.