If you are unhappy with the charges imposed by your bank, is it feasible to switch bank, and is it realistic to expect to reclaim charges made by your bank in the past? Here are key points regarding these matters.
Finding the best account
At times of very low base rates, some current accounts do not pay interest. Where it is paid, an attractive interest rate may only be paid on the first £3,000 or so, with a very low rate applying to the remaining balance. Also consider that the provider may only pay the enhanced rate if payments are made to the account every month. Overdraft terms may also be less attractive in higher interest accounts.
Personal current accounts are only free if you stay in credit. Overdrafts are charged at fairly high rates of interest, sometimes more than credit card debt, so finding the best terms on overdrafts is advisable. It is likely that there will be some providers offering interest-free overdrafts for a period of time, such as 12 months, or up to a certain amount, such as £250. For unauthorised overdrafts you can still expect high rates of interest.
Business current account customers can expect to incur charges for standard account services once they have held the account for a specified period, typically two years. Again these charges will vary between banks, so it pays to compare charges prior to opening an account.
Before opening a savings account, check whether there are any charges or interest reductions imposed on larger withdrawals or on short notice withdrawals. If you feel you might incur these charges, shop around for an account with no charges or lower charges.
Reclaiming bank charges previously applied
There has been a great deal of publicity recently regarding charges imposed by banks for breaching overdraft limits, or for bounced cheques and direct debits. The contention of consumer groups was that the level of charge, up to £35 per breach, was unfair and well in excess of the costs incurred by the bank as a result.
Following a ruling from the United Kingdom Supreme Court in November 2009, reclaiming bank charges has become much more difficult. The Supreme Court ruled that laws relating to fairness in consumer contract terms did not apply here. However, since this ruling, some customers are still being successful in claims for redress against bank charges.
If you are pursuing a claim of this type, you should never assume you will be successful, and when carrying out household budgeting, you should always do this on the assumption that your claim will not succeed.
Your first step should be to complain to the bank concerned. If the bank rejects your complaint, or offers a level of redress you are unhappy with, there are other options open to you.
The Financial Ombudsman Service (FOS) adjudicates on complaints where the complainant and the firm are unable to reach agreement. The FOS has indicated that it is willing to consider bank charging cases where severe financial hardship has resulted, or where the charge applied was excessively disproportionate. As with all matters it handles, the FOS will make its decision based on whether it believes the bank has treated you fairly and reasonably. The FOS makes its decisions based on the facts of the case and not on how well you argue your case, so there should be no need for you to use the services of a claims management company; indeed doing so could be to your disadvantage as the claims management company may insist on a considerable share of any compensation. Any FOS instruction to a financial institution to pay redress to a customer is legally binding.
If the FOS cannot consider your case, or you do not wish to use their services, the only option is to take the matter to court, and here you run the substantial risk of having to pay all of your legal costs, and possibly losing the case as well.