When a person opens a bank account or takes out a credit card they enter into a contract. Bank charges for going overdrawn or for bounced cheques are the equivalent of a charge for breach of contract, known as liquidated damages, and the courts can enforce payment. However the sum must reflect actual costs incurred and not exceeds damages the bank suffered due to the breach of contract; otherwise it becomes a penalty, which is unenforceable by the courts. The argument that the charges exceed the customers losses and are not enforceable by law is covered in the Unfair Terms in Consumer Contracts Regulations 1999, Unfair Contract Terms Act 1977 and at Common Law. Some banks argue that charges are a fee for a service, however if this is the case then they must be reasonable under section 15 of the Supply of Goods and Services Act 1982.
You can try to claim back any excessive charges, which the law would class as penalties. These will be anything over and above what an infringement costs the bank. Examples are: ?20 charges for letters sent out informing customers they have breached an overdraft limit, ?30 for a bounced cheques or failed direct debit when the bank merely incurs the cost of informing the other party; the imposition of large daily fines with interest for going overdrawn.
Go back through your old statements and add up all charges that could be considered excessive. If, like many people, you do not keep statements going back for more than a few months see if you can find this information with your internet banking. If not, write to the bank requesting a comprehensive list of all charges showing what the offence was, the date and the amount, under the Data Protection Act. By law the bank must provide this information in 40 working days.
It may be that the bank tries to stall you and waits before responding that there is a specific form to fill in. In your initial letter ask if there is a form and for a copy of it to be sent and make a follow up phone call a week later.
Under the Data Protection Act 1998, you are entitled to get from your bank a list of any charges over the past six years. Banks may charge a maximum of ?10 for this.
However, statements are not covered by the Act, so banks are using this loophole to charge higher fees. Many customers are finding that when they ask for a list of charges, staff tells them this cannot be provided, but old statements can.
The bottom line is, ensure you make it clear that you're using the Data Protection Act to request of list of charges. Otherwise you could find that you're being charged more than you need to.
In order to argue against banks' assertions that the charges are for services, request a copy of your original contract and any changes to it which can be used as evidence that you did not enter into such an agreement.
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