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One man’s battle to obtain compensation for bank charges has led to a flood of similar claims against banks across the UK. Stephen Hone, a law student from Devon, was so incensed by what he saw as ‘unfair’ charges made by his bank Abbey when his current account became overdrawn that he pursued the issue, eventually filing a small claims case against the bank, which was settled before reaching court when Abbey agreed to refund in full all charges levied against his account over the previous six years. Spurred on by his success, Hone now runs his own website giving free advice on claiming back bank charges and has since managed to help a couple challenge their bank and win back several thousand pounds in compensation for charges levied on their account over several years, which they also claimed were unfair. Under UK law (Consumer Contracts Regulations 1999), banks are only allowed to charge fees to cover their own administration costs for problems such as unauthorised overdrafts, and they must not make any profit from them. However, the amount charged by some banks has been brought into question by these cases, which have sparked a great deal of public attention and led to thousands of similar challenges in small claims courts across the country. The average charge for slipping into the red without permission is £30, even if the account is only overdrawn by a few pence or pounds. You may also be charged an additional fee for every debit transaction that occurs while the account is overdrawn. More often than not, the charges are automatically made against your account without you receiving any advance notice or opportunity to correct the account and bring it back into the black. Further money is made by some banks who charge a higher rate of interest on unauthorised overdrafts than on authorised overdrafts – and often this higher rate is applied not just on the amount over the permitted limit, but on all overdrawn funds. For example, if you have an authorised overdraft of £100 and you accidentally become £110 overdrawn, you could be charged the higher rate of interest on the full £110, even though £100 of it has been authorised by your bank. Practices such as this are currently being scrutinised by the Office of Fair Trading and consumer bodies such as Which?, and there have been calls for the Banking Code to be changed to ensure that all charges levied by banks are fair and justified. This article is copyright protected and is not for republishing |
