Last summer I received a letter from my bank. Nothing particularly unusual about that. We are all used to the monthly bank statements and attractive offers to invest our hard earned cash. When we first start out on the corporate ladder it’s all very exciting that we have this facility. Particularly when we are young and we receive our first pay cheque we feel like we’ve arrived. Unfortunately many of us soon get into the habit of blowing it all on booze and partying on the Friday night and then we find we are living on beans and stale bread for the next five days before repeating the process.
Then we get a bit older and we start to get invitations to apply for a credit card that we can ill afford but if we’re moving out and setting up home we need to furnish it. It’s dangerous way of handling money and before you know it your account is maxed out with nowhere to go. You see your bank and arrange an overdraft facility and that gives you temporary relief before you start drifting over the limit so you get hammered by bank charges.
In time you will be offered a consolidation loan to ‘sort it all out’ plus a little extra spending money. You’re back to one easy payment and yet you don’t use that spare money for savings you blow it all again on something you don’t need and you’re back to square one.
You may recognise the picture I’m painting.
I’ve had problems not dissimilar to these over the years and one thing that bothered me about the charges was that they were making it increasingly difficult to catch up. I didn’t so much resent the charge because I was spending money that wasn’t mine. It was level of charges that I objected to.
What did I do about it? Absolutely nothing.
I continued to let the banks take, take, take and all the while my financial situation got ever more perilous. Then, someone stood up and said No!’ and that man was Stephen Hone, father of three and law student, from Plymouth.
When Stephen’s bank, Abbey, removed 64 from his account with two 32 charges he asked for them to be refunded. Abbey initially refused as they were fair under the terms of the contract. Mr Hone countered that under the Unfair Terms and Contracts Regulation (1999) all penalty charges have to reflect the cost of administrating them.
As such fees are not permitted to be profit-making if they do not reflect that true cost they are therefore illegal. A BBC survey later revealed that the true cost of administrating a 30.00 charge was as little as 4.50.
Following legal procedure Stephen compiled a list of all the charges made over the previous six years (the maximum period) and filed a claim at the small claims court. Shortly after Abbey paid up the 840 owed which was later used to set up his Penalty Charges UK website which aims to help others similarly affected.
There was some concern for those in the process of claiming recently when, for the first time, a leading High Street bank Lloyds TSB was able to successfully have a claim thrown out in court. Fortunately, this situation is the exception rather than the rule.
So what does all this have to do with my letter from the bank?
Well, my bank had responded to my claim made back in the spring and agreed to pay back the full total claimed. I won’t say how much it was but it was comfortably into four figures. Justice had been done.
Unfortunately refunds have since stopped to allow the banks time to challenge this situation in the courts. A decision will be made in April so those who have yet to claim wait with baited breath.