Bank charge

In the United Kingdom, bank charges, also (inaccurately) [So held Mr Justice Andrew Smith in "Office of Fair Trading v Abbey National and Others (2008)] called penalty charges, are made against people's credit card, store card, bank and some other accounts for going overdrawn or bouncing (failing to pay) a direct debit, cheque or standing order amongst others.

The practice of imposing these charges has become controversial in the UK, with customers and consumer watchdog groups claiming that the charges are much higher than allowed by law. [ [http://news.bbc.co.uk/1/hi/business/6169539.stm BBC "Money Programme": "Are penalty charges bank robbery?" 11 December 2066] ] In one case alone, a businessman successfully reclaimed about £35,000 from his bank. After considerable press coverage of the issue and the efforts undertaken by some people to recover overcharges, thousands of people are claiming the charges back plus a statutory 8% interest. Consumers and businesses alike are suing banks and credit card companies in the small claims courts in Scotland, Ireland, England and Wales.

The movement's beginnings are generally credited to Stephen Hone, a law student from Plymouth, England. Hone requested a refund of charges by Abbey, arguing that under the Unfair Terms in Consumer Contracts Regulations, all penalty charges had to truly reflect the cost of administering them. Hone believed that penalty charges which are higher than their administrative costs are illegal. After filing in small claims court against Abbey, Hone eventually recovered £840 from the bank. He eventually set up a web site [ [http://www.penaltycharges.co.uk/ PenaltyCharges.co.uk] ] to show others how to recover charges, and has set up an Internet-based petition on the web site of the Prime Minister. [ [http://petitions.pm.gov.uk/Penaltycharges/ 10 Downing Street: Petitioning the Prime Minister to bring in new legislation to prevent the current abuse by banks and companies in relation to Penalty charges] ]

Websites such as the BBC, the Consumer Action Group and Martin Lewis' "Money Saving Expert" offer free help and support to consumers and businesses wishing to reclaim these charges. [ [http://www.moneysavingexpert.com/reclaim/bank-charges Martin Lewis: "Bank Charges: Reclaim them, they're unlawful, get up to six years' money back"] ] [ [http://www.thisismoney.co.uk/bankcharges This is Money: "Ten steps to reclaim unfair bank charges," Simon Lambert, May 24, 2007] ]

These charges are generally imposed by banks throughout the world, but are subject to different limitations in each country. In the United States, for instance, banks are generally allowed to charge whatever they see fit; such charges are often a source of considerable revenue.

The law

The law in the UK refers to:

# Unfair Terms in Consumer Contracts Regulations 1999 (SI. 1999/2083).
# Unfair Contract Terms Act 1977
# "Office of Fair Trading v Abbey National and Others (2008)"

References