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Overdraft misery as banks block refunds
Complaints flood in as the rejection of thousands of compensation claims for high charges flouts the new Lending Code
Lauren Thompson
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div#related-article-links p a, div#related-article-links p a:visited { color:#06c; } Banks are tricking thousands of savers out of compensation for overdraft charges by falsely claiming that they have been given official sanction to shelve complaints. They are also bamboozling customers with legal jargon.
Since the banks won a high-profile case in the Supreme Court late last year, they have been dealing with a backlog of more than a million complaints. Most are automatically rejected, even in cases of financial hardship or where the bank is clearly at fault.
The unwillingness of the banks to pay compensation claims flies in the face of the new Lending Code rules introduced last November stating that banks should treat customers in financial difficulty “fairly”.
Even those struggling with day-to-day living costs, including the recently unemployed or separated, are nearly always denied refunds.
Related Links
Martin Lewis, of Moneysavingexpert.com, the personal finance website, says: “Banks send standard letters containing complex legal jargon designed to confuse the customer and deter them from pursuing their overdraft claim.”
There has been widespread confusion over who can reclaim overdraft charges since the banks won their test case against the Office of Fair Trading (OFT) last November. The banks hailed the court’s decision as an end to the “consumer revolution” that began in 2006. Before the case, hundreds of thousands of people reclaimed about £1 billion in overdraft charges, while many more put in a claim.
However, consumer campaigners say that, since the ruling, the banks have been too quick to seize on the court’s decision as an excuse to reject all overdraft complaints. Even the court said that its judgment did not necessarily block the way for refunds, as other avenues that fell outside the scope of its verdict could be explored.
Mr Lewis says: “The Supreme Court made it clear that while you do not have the right to receive refunds of overdraft charges automatically, you do have the right to be treated fairly by your bank. Penalising people with snowball charges that continue to mount up into hundreds or thousands of pounds is not fair.”
Which?, the consumer group, says that if bank charges spiral customers into debt, or if they have incurred high charges for a small overdraft, they may be able to make a claim. Cases should also not be dismissed where the charges result from a bank mistake.
Phil Jones, of Which?, says: “What is ‘unfair’ will always depend on specific facts and circumstances.”
Many people who have had their claims rejected are taking their cases to the Financial Ombudsman Service (FOS), the independent service for settling disputes between banks and their customers. You must complain to your bank first, but you can then take your case to the FOS if you are unhappy with the reply or do not receive a response within eight weeks.
The ombudsman says that about 300 people in financial hardship are complaining every week about overdraft charges. It says most of these complaints will be upheld and banks will be ordered to repay the charges,some of them going back six years or more.
The ombudsman also receives about 150 complaints a month about “misapplied” bank charges — when someone has been charged as a result of a bank’s mistake and it refuses to refund the money.
However, experts warn that if you do not fit into either of the above categories, it will be much harder to receive a payout. Mr Lewis says: “In this case your only option is to follow the court route, which is risky and difficult.”
The ruling last November also stopped an OFT investigation that could have forced the banks to pay out billions in refunds automatically. Some campaigners had hoped that it would cap the fee for bouncing cheques or exceeding overdraft limits at less than the typical £30 charge.
Even though these hopes have been dashed, some banks have lowered their overdraft fees, stung by criticism during the court case. However, savers need to remain vigilant as penalties can remain prohibitively high.
Yorkshire Bank, for instance, charges 29.9 per cent interest on unauthorised overdrafts, as well as a £25 per month fee, plus £25 on any day that direct debits or standing orders are made from an unauthorised overdraft. It charges £35 in the case of guaranteed cheques and returned payments.
Michelle Slade, of Moneyfacts.co.uk, the comparison website, says; “Even with the reduced charges, debts can still spiral if you don’t act fast. Providers such as Alliance & Leicester and Halifax make a daily charge of £5 for going into an unauthorised overdraft.
“Costs will soon escalate, particularly if the letter notifying you is delayed in the post or you cannot afford to bring the account back within your agreed limit. If you do get caught out, act fast and contact your bank. It may be possible to get the charge refunded if it is your first indiscretion.”
The new coalition government has given campaigners fresh hope that the court case is not the end of the matter. In the coalition agreement, it promised to tackle overdraft charges, stating: “We will introduce stronger consumer protections, including measures to end unfair bank and financial transaction charges.”
No more details have been released, but campaigners remain hopeful that the coalition will get to grips with the issue. Back in April, Nick Clegg, the Liberal Democrat leader and Deputy Prime Minister, said: “Bank charges really are a scandal. The UK banks only exist because they have been bailed out by British taxpayers, yet financial service companies are still ripping people off. Legal action hasn’t worked, so we will legislate to end unfair bank charges.”
Case study
Jamie Turnbull, 27, was recently denied a refund of £150 in overdraft charges, even though the charges were the result of a mistake by his bank.
Mr Turnbull stopped using his NatWest account three years ago and asked the bank to ensure it had no overdraft facility. Two years later he was contacted by a debt collection agency claiming that he owed NatWest £500 in overdraft charges.
“It turned out that the bank had left a direct debit of £33 from my annual membership to the General Teaching Council for England,” Mr Turnbull, who lives in Bath, says.
“NatWest had not paid this but charged me £30 for each bounced transaction and monthly charges on top of this for two years. It never contacted me to tell me of the situation.”
Mr Turnbull agreed to pay the debt collector £150, which he was told he would later be able to reclaim from NatWest.
However, the bank refused to deal with his complaint while the test case was continuing, and eventually rejected his complaint in April.
“I felt that this was hugely unfair as I was never notified of the charges and I had specifically asked the bank not to allow the account to go overdrawn in the first place,” he says.
Mr Turnbull was going to take his case to the Financial Ombudsman Service but finally received his money after the intervention of Times Money’s Troubleshooter.
Source: Overdraft misery as banks block refunds - Times Online
Complaints flood in as the rejection of thousands of compensation claims for high charges flouts the new Lending Code
Lauren Thompson
Recommend?
div#related-article-links p a, div#related-article-links p a:visited { color:#06c; } Banks are tricking thousands of savers out of compensation for overdraft charges by falsely claiming that they have been given official sanction to shelve complaints. They are also bamboozling customers with legal jargon.
Since the banks won a high-profile case in the Supreme Court late last year, they have been dealing with a backlog of more than a million complaints. Most are automatically rejected, even in cases of financial hardship or where the bank is clearly at fault.
The unwillingness of the banks to pay compensation claims flies in the face of the new Lending Code rules introduced last November stating that banks should treat customers in financial difficulty “fairly”.
Even those struggling with day-to-day living costs, including the recently unemployed or separated, are nearly always denied refunds.
Related Links
Martin Lewis, of Moneysavingexpert.com, the personal finance website, says: “Banks send standard letters containing complex legal jargon designed to confuse the customer and deter them from pursuing their overdraft claim.”
There has been widespread confusion over who can reclaim overdraft charges since the banks won their test case against the Office of Fair Trading (OFT) last November. The banks hailed the court’s decision as an end to the “consumer revolution” that began in 2006. Before the case, hundreds of thousands of people reclaimed about £1 billion in overdraft charges, while many more put in a claim.
However, consumer campaigners say that, since the ruling, the banks have been too quick to seize on the court’s decision as an excuse to reject all overdraft complaints. Even the court said that its judgment did not necessarily block the way for refunds, as other avenues that fell outside the scope of its verdict could be explored.
Mr Lewis says: “The Supreme Court made it clear that while you do not have the right to receive refunds of overdraft charges automatically, you do have the right to be treated fairly by your bank. Penalising people with snowball charges that continue to mount up into hundreds or thousands of pounds is not fair.”
Which?, the consumer group, says that if bank charges spiral customers into debt, or if they have incurred high charges for a small overdraft, they may be able to make a claim. Cases should also not be dismissed where the charges result from a bank mistake.
Phil Jones, of Which?, says: “What is ‘unfair’ will always depend on specific facts and circumstances.”
Many people who have had their claims rejected are taking their cases to the Financial Ombudsman Service (FOS), the independent service for settling disputes between banks and their customers. You must complain to your bank first, but you can then take your case to the FOS if you are unhappy with the reply or do not receive a response within eight weeks.
The ombudsman says that about 300 people in financial hardship are complaining every week about overdraft charges. It says most of these complaints will be upheld and banks will be ordered to repay the charges,some of them going back six years or more.
The ombudsman also receives about 150 complaints a month about “misapplied” bank charges — when someone has been charged as a result of a bank’s mistake and it refuses to refund the money.
However, experts warn that if you do not fit into either of the above categories, it will be much harder to receive a payout. Mr Lewis says: “In this case your only option is to follow the court route, which is risky and difficult.”
The ruling last November also stopped an OFT investigation that could have forced the banks to pay out billions in refunds automatically. Some campaigners had hoped that it would cap the fee for bouncing cheques or exceeding overdraft limits at less than the typical £30 charge.
Even though these hopes have been dashed, some banks have lowered their overdraft fees, stung by criticism during the court case. However, savers need to remain vigilant as penalties can remain prohibitively high.
Yorkshire Bank, for instance, charges 29.9 per cent interest on unauthorised overdrafts, as well as a £25 per month fee, plus £25 on any day that direct debits or standing orders are made from an unauthorised overdraft. It charges £35 in the case of guaranteed cheques and returned payments.
Michelle Slade, of Moneyfacts.co.uk, the comparison website, says; “Even with the reduced charges, debts can still spiral if you don’t act fast. Providers such as Alliance & Leicester and Halifax make a daily charge of £5 for going into an unauthorised overdraft.
“Costs will soon escalate, particularly if the letter notifying you is delayed in the post or you cannot afford to bring the account back within your agreed limit. If you do get caught out, act fast and contact your bank. It may be possible to get the charge refunded if it is your first indiscretion.”
The new coalition government has given campaigners fresh hope that the court case is not the end of the matter. In the coalition agreement, it promised to tackle overdraft charges, stating: “We will introduce stronger consumer protections, including measures to end unfair bank and financial transaction charges.”
No more details have been released, but campaigners remain hopeful that the coalition will get to grips with the issue. Back in April, Nick Clegg, the Liberal Democrat leader and Deputy Prime Minister, said: “Bank charges really are a scandal. The UK banks only exist because they have been bailed out by British taxpayers, yet financial service companies are still ripping people off. Legal action hasn’t worked, so we will legislate to end unfair bank charges.”
Case study
Jamie Turnbull, 27, was recently denied a refund of £150 in overdraft charges, even though the charges were the result of a mistake by his bank.
Mr Turnbull stopped using his NatWest account three years ago and asked the bank to ensure it had no overdraft facility. Two years later he was contacted by a debt collection agency claiming that he owed NatWest £500 in overdraft charges.
“It turned out that the bank had left a direct debit of £33 from my annual membership to the General Teaching Council for England,” Mr Turnbull, who lives in Bath, says.
“NatWest had not paid this but charged me £30 for each bounced transaction and monthly charges on top of this for two years. It never contacted me to tell me of the situation.”
Mr Turnbull agreed to pay the debt collector £150, which he was told he would later be able to reclaim from NatWest.
However, the bank refused to deal with his complaint while the test case was continuing, and eventually rejected his complaint in April.
“I felt that this was hugely unfair as I was never notified of the charges and I had specifically asked the bank not to allow the account to go overdrawn in the first place,” he says.
Mr Turnbull was going to take his case to the Financial Ombudsman Service but finally received his money after the intervention of Times Money’s Troubleshooter.
Source: Overdraft misery as banks block refunds - Times Online
