It’s a lot of money, £400 million, even to the Big Five High Street banks (profits last year £38 billion). But that’s how much they’ve refunded to their customers in illegal overdraft charges in the last six months. Until now they have refused to give any information. But when they reported their half-year results to the stock market they had to ’fess up. The amounts ranged from £36mn for Lloyds TSB to £116mn for HSBC with the other three around £80-£90 million each.
Sorry, did I say these were refunds of illegal charges? What I meant to say was they were "goodwill payments" (RBSNatWest) because of "reluctance…to engage in legal action against [our] customers" (HSBC).
Hmmmm. Over the last year the reclaim your bank charges bandwagon has rolled on and millions of people have asked for their money back – and got it. Faced with this unprecedented customer revolt – and just before they had to admit to the City how much had been paid out – the banks did a deal with their regulator, the Financial Services Authority. It went like this. The Office of Fair Trading would bring a test case which the banks would defend so the courts could at last decide if charging someone £39 for going 1p overdrawn is legal or not. Meanwhile, all claims that have not reached the stage of an offer will be put on hold. Even the Financial Ombudsman has agreed to stick them in his pending tray until the judges sort out the law.
That may take a long time. A case like this – funded by the taxpayer on one side and the deep pockets of the banks on the other – is bound to go to the House of Lords for a final ruling. We may not see a decision this decade.
But if you have been charged large amounts for straying into the red you should still put in a claim. It will be held up until the court ruling. But once the claim is in it cannot be ignored. And if the charges were made four or more years ago you will avoid the risk that by the time the courts rule your charges will be too old – more than six years – to reclaim.
And for the future? Try as hard as you can not to go overdrawn without permission. And switch banks to one that gives you a generous buffer if you do.