Reclaim Unfair Bank Charges

The number of payment protection insurance (PPI) complaints through the Financial Ombudsman Service increased three-fold last tax year, the latest Ombudsman report has revealed.

The report found that there were 31,066 PPI complaints in the 2008/09 tax year, compared to 10,652 the year before, the majority of which were surrounding the sale of payment protection insurance.

Many consumers have successfully complained because they believe they were pressurised into buying payment protection policies, while other people were unaware they had even agreed to take out a PPI policy.

Of those who took their complaints to the Financial Ombudsman Service, after already unsuccessfully complaining to the business involved, 89 per cent found that the outcome was changed in their favour.

According to the Ombudsman, this high rate of turnarounds, “suggests there is still a widespread problem involving businesses rejecting complaints that they know, or should know, we will uphold.

“And it gives rise to concern about the treatment of those who, for whatever reason, decide not to “appeal” their complaint to the ombudsman service,” it said.

Expressing his disappointment at the continued increase in PPI complaints, Ombudsman chairman Sir Christopher Kelly said: “The high volume of complaints about payment protection insurance was especially disappointing. We had hoped that action by the regulator might result in the collective resolution of large numbers of complaints without the continuing need for consumers to refer individual cases to us.”

Speaking of the need for a resolution of mis-sold payment protection insurance, chief ombudsman Walter Merricks said: “A solution to the problem would reduce the volatility of the ombudsman service’s workload, adjust unrealistic expectations of what we can be expected to deliver, and ease tensions between the financial services industry, its regulator and its ombudsman.”

The House of Lords unexpectedly agreed that the banks involved in the unfair bank charges test case could appeal a decision made earlier this year that their terms and conditions are subject to fairness rules.

The test case was brought against eight major banks and building societies by the Office of Fair Trading to try and combat the charges taken from customers’ accounts for unauthorised overdraft borrowing.

The decision by the Court of Appeal in February not to allow the banks to appeal was seen as a victory for consumers, and campaigners are disappointed that the House of Lords is allowing the banks to delay the process.

“This latest news is just another delaying tactic by the banks,” said James Caldwell, director at Fairinvestment.co.uk, commenting on the unexpected decision. “The test case has been going on for long enough now, and we are surprised that this decision has been made by the House of Lords.”

Martin Lewis, founder of consumer revenge website MoneySavingExpert, echoed what Mr Caldwell said, that this is delaying consumers from getting back cash which has been taken from their accounts unlawfully and which is rightfully theirs.

“It’s time the banks gave up and paid out,” Mr Lewis said. “Hundreds of thousands of people are waiting to get money back that’s been unlawfully taken from their accounts, without their permission. Both the High Court and the Court of Appeal have already said bank charges are governed by fairness rules and the OFT has said it provisionally thinks charges are unfair.”

Bradley Askew, managing director at at specialist claims company, Claims Financial, said: “We have every confidence that the House of Lords will find for the consumer, albeit we are surprised because three Court of Appeal Justices unanimously agreed that there were no reasonable prospects of overturning their decision and that such an appeal would not be in the public interest.

And, he added, “We continue to encourage consumers to lodge their bank charge complaints, and remain confident that the House of Lords will do the right thing.”

The OFT has now decided to concentrate on just three banks – HSBC, Lloyds and Clydesdale Bank – in the hope that this will streamline the test case and bring it to a faster conclusion.

In 2005 UK banks made approximately £5bn profit from the penalty charges associated with consumers going overdrawn, having returned cheques, unpaid direct debits and standing orders.Customers have accepted these charges because the banks will tell you it is the terms and conditions of the account. What the banks will not tell you however is that it is against English or Scottish law to charge a penalty fee which exceeds the cost incurred.

After successfully claiming back over £1000 in bank fees I decided to set up this website to help other people in similar circumstances who have, for whatever reason, been charged some of these unlawful, unethical, unfair charges.

Fair Investment Company Ltd is regulated by the Ministry of Justice in respect of regulated claims management activities; its registration is recorded on the website www.claimsregulation.gov.uk

More than 65,000 bank charges claims are currently frozen in the courts while the test case to determine their fairness drags on.

Figures from the Ministry of Justice, passed onto consumer group Legal Beagles, has determined what many already knew – that tens of thousands of consumers have tried to reclaim their bank charges but have become entangled in the web of their legality.

The Office of Fair Trading continues to battle it out in the High Court with eight of the biggest high street banks, but in the meantime the Financial Services Authority has introduced a waiver, extended again last month, which means the banks can defer dealing with customers’ complaints regarding banks charges.

The latest extension of the waiver – originally introduced for six months in July 2007 – is valid until July 2009, until which time customers have no choice but to wait and see, unless the test case is settled before July comes around.

Consumer rights groups have criticised the FSA for extending the waiver yet again – while waiting for a result from the test case will ultimately result in more clarity for the consumer, they argue that in the meantime they are languishing without their cash but the banks are still making money from their customers by continuing to implement the charges – sometimes as much as £35 for exceeding their overdraft or bouncing a cheque.

Julian Siddle, a spokesperson for the group believes that the waiver is one-sided in favour of the banks.

“People are still incurring charges even though banks have obtained a waiver, so they don’t have to deal with new complaints,” he told the BBC, and, according to MoneySavingExpert Martin Lewis, more than a million people had already reclaimed their bank charges before the waiver was enforced.

And, the Ministry of Justice’s (MoJ) figures are an underestimate of the number of cases currently on hold, according to Nick Spooner of Legal Beagles.

“The 65,000 figure only applies to the cases which the MoJ was absolutely sure related to claims against banks for the return of overdraft charges,” he said. “There are others that the MoJ couldn’t pick up when searching its data base, because of the different ways in which people had written their claims. Meanwhile thousands more claims are piling up with the banks themselves.”

The Financial Services Authority has decided to extend the waiver on reclaiming bank charges by another six months, because the High Court test case is still ongoing.

The FSA can revoke the waiver at any time, for example if the test case comes to a conclusion or if the FSA does not think that it is making sufficient progress and the consumer is suffering as a result.

The waiver was first introduced in 2007, when the FSA said that there was too much inconsistency in the reclaiming process – some people were successfully reclaiming their bank charges with interest, whilst others were having their accounts closed down by their bank after being refunded, and others were having their request refused.

Last summer, the waiver was extended for six months, but has now had to be extended for a further six months because it was due to run out on the 26th of this month.

The new expiry date of the waiver is July 2009.

Thousands of claims are gathering dust in small claims courts while customers await the result of the test case, which is hoped to determine the legality and fairness of bank charges, but in the meantime, the banks are allowed to continue charging customers as much as they want – sometimes up to £39 – every time a customer exceeds their overdraft, or bounces a cheque.

Bradly Askew, managing director of Claims Financial, said: “this is yet another disappointing decision for consumers, who yet again have not been consulted at all.  It is also very bad timing because many of our clients are already struggling due recent economic turmoil, which, ironically is due to the banks.

He continued: “We have a lot of disappointed clients. Many for them have now been waiting for 18 months.”

While Mr Askew is confident that the consumer will eventually emerge victorious, he said that “the delay is unjust because the Office of Fair Trading (OFT) has already said they believe the charges are unfair, and a High Court Judge has given a judgment that the OFT can make such a ruling”, referring to an ongoing appeal by the banks to overturn the ruling which says the OFT can decide what constitutes a ‘fair’ bank charge.

“It seems to me that the right thing in this case would be for every consumer in the country to get their refund and for the banks to stop these delaying tactics.” he said.

The banks could be in violation of the FSA waiver which has frozen the reclaiming process until a High Court test case is settled, because they have increased the amount they charge customers for going over their overdraft limit. 

One of the conditions of the Financial Services Authority waiver – introduced in July 2007 – is that the banks must not “make materially adverse changes in the level of its unauthorised overdraft charges”.  Mr Pilgrim believes that the banks have changed the charges in response to the test case between the Office of Fair Trading and eight of the UK’s biggest banks and building societies, “in a way that will make it less simple for claims to be bought against them using the law that is being contested in the High Court (Unfair Terms in Consumer Contracts).” 

The test case, and subsequently the waiver, came about because of the inconsistent way that customers were being treated by their banks when they made a claim, and the lack of refunds for those that did not bother to make a claim.  Some have been refunded in full with interest, others have received some of the money, while some customers have had their bank account closed against their wishes after making a claim. 

Mr Pilgrim says that the waiver is unfair and one-sided in favour of the banks, because it means that customers are unable to reclaim their money but still have to continue paying the charges until the issue is clarified.  Analysis from MoneyExpert.com found that banks are charging 20 per cent more than they were this time last year every time a customer exceeds their authorised overdraft or bounces a cheque, increasing it from an average of £25 to as much as £30 a time. 

The FSA said that it is monitoring the banks to ensure they are complying with the condition laid out in the waiver, but Mr Pilgrim hope that the waiver will be revoked, as stipulated in its conditions, if the banks are not found to be compliant. 

“The banks increasing their charges only adds insult to injury” he said.

While the banks await a judgement which will help to determine whether or not bank charges are unfair, it has emerged that RBS Natwest is planning to “pro-actively” refund their customers in the event that the high court judge rules in favour of the OFT.

The Office of Fair Trading and eight of the UK’s major banks and one building society went to court earlier this year to determine the legality of the banks charging customers as much as £35 a go when they exceed their overdraft limit, bounce a cheque, or have insufficient funds for a direct debit.

The OFT believes that these charges are disproportionate to the actual costs incurred by the banks and should be reduced to reflect this cost.

The BBC has now learned by being passed an internal document that at least some of the banks are putting contingency plans in place, in the event that they don’t win the test case and are faced with claims for millions of pounds from disgruntled customers.

In response to the leaked document which implied that many customers will be sent a refund if the OFT wins, the bank said it was merely putting a plan in place to deal with one of the possible outcomes of the high court case.

The bank is “preparing systems and processes to pro-actively refund charges to the group’s customer base.” It currently has about 13 million customers, but obviously not all of these will have been subjected to the overdraft charges.

“All customer accounts that are due a refund will be calculated as accurately as possible. Any monies will be accurately accounted for and reconciled,” the bank document says, in “avoidance of group reputational damage and/or loss of funds.”

However, an RBS spokesperson told the BBC that this document should not be misconstrued as an indication that the bank will not continue to fight its corner if the banks lose the current appeal in the courts.

“This work stream has absolutely no bearing on how we see the outcome of the test case,” the spokesperson said.

Leading UK banks and the Office of Fair Trading (OFT) are meeting in the High Court today as the banks appeal a previous decision over ‘unfair’ bank charges.

The OFT won the first stage of a test case intended to decide the fairness of unauthorised overdraft charges earlier this year. However, the banks are today appealing against the decision, which said that the OFT could assess the fairness of bank charges.

Some banks currently charge as much as £35 a time when a customer exceeds their overdraft, and while a penalty is applicable, the OFT believes that the amount charged does not reflect the admin costs thought to be around £2.

However, the banks Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, RBS and Nationwide building society, have launched an appeal claiming that consumer contract regulations do not give the OFT the right to decide whether the bank charges are unfair or not.

Until recently, bank customers had successfully claimed back millions of pounds from banks with the argument that the charges are unfair. However, the FSA has since imposed a freeze on the cases until the matter is settled.

The banks are rumoured to earn more than £2million a year through the bank charges and are consequently threatening to end free banking if the OFT emerges victorious.

Commenting on today’s appeal, the British Bankers Association (BBA) said: “The banks are appealing on this issue as they continue to believe that unarranged overdraft charges are fair and that the fairness test case in the Unfair Terms in Consumer Contract Regulations 1999 (“UTCCRs”) does not apply to these types of charges.”

However, consumer watchdog Which? argues that the banks should not be appealing as consumers are already finding their budgets overstretched. “It’s extremely disappointing that instead of looking for ways to make their customers’ lives easier during these difficult times, the banks are piling on the misery by continuing to hit them with unfairly high unauthorised overdraft fees.” said Which? chief executive, Peter Vicary-Smith.

“The banks should not be appealing the High Court’s decision. They should be working with the OFT to establish what constitutes a fair unauthorised overdraft charge and starting the process of refunding the customers they have been overcharging for years.”

Customers are still being mis-sold payment protection insurance while the FSA ‘dithers’ over appropriate regulation of the controversial industry.

The FSA has said that it is stepping up its investigation into the PPI selling process, but meanwhile, thousands of UK consumers could be wasting hundreds or thousands of pounds in loan insurance payments and huge amounts of interest when it is added onto the cost of their loan.

Consumer watchdog Which? has criticised the FSA for taking so long to determine what action should be taken on companies that sell PPI to customers unfairly – i.e. by not disclosing to them all that it entails.

Among the reasons that constitute a PPI policy being mis-sold are not telling the customer that the amount is being added onto their loan and that it will therefore incur interest; in its investigation, the FSA found that only half of customers were told about the key limitations and exclusions of the policy, and many were not informed of the total monthly amount they would pay, including PPI in addition to the loan repayments.

Jon Pain, managing director of the FSA’s Retail Markets, said that “Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes.”

But Which? believes that the FSA could be doing more. Which? chief executive, Peter Vicary-Smith criticised the Financial Services Authorities’ efforts thus far, accusing it of emitting a “weak response” to the issue, and doing little to “help the millions of people who may have been mis-sold policies or to improve sales practices.”

Which? has written to the FSA, calling on the regulator to take more affirmative action on the industry. The watchdog wants to see companies who sell PPI ringing up their customers and telling them about the problems in the market, explaining what constitutes a ‘mis-sold payment protection insurance’ policy, and giving advice on how to make a payment protection claim if the customer thinks that they have been mis-sold one.

One couple, used by Which? as an example to demonstrate the problems in the PPI market, paid out almost half the amount borrowed in PPI – £22,568 for a £56,000 loan.

Doug Taylor, Which? personal finance campaigns manager, thinks that “Slapping firms on the wrist with large fines is a start but doesn’t go far enough. The fact that firms are still being fined for PPI failings shows that the problem won’t go away on its own and PPI’s relatively low profile means the number of complaints doesn’t necessarily reflect the number of mis-sold policies.”

Story up today on Fairinvestment.co.uk about a man who was ‘conned’ out of more than £500 when Natwest credited his account with a refund of less than he could have got with a claims company, against his wishes – read the full story at fairinvestment.co.uk