Overdrawn £1 for 1 day – how much will this cost you?

Naturally, banks maintain their ’late fees’ are lawful and fair. Despite this assertion, you can easily recoup penalties that you feel are unusually harsh.

Financial institutions are likely to settle with you as they have no desire to go to court and have a precedent set, as that would open the floodgates to aggrieved customers filing claims for billions of pounds worth of charges going back six years.

If you feel you have been charged over the odds by your bank, how do you go about reclaiming the charges? Read on.

Do your homework

First of all, it’s good to know you’re not alone in doing this. Clawing back the money may involve making a claim via the Small Claims Court. Though this is a simple process, it will be a daunting prospect for most people.

There are a number of campaign groups who offer support and practical advice on the issue. The most notable are Bank Charges Hell (www.bankchargeshell.co.uk) and Consumer Action Group (www.bankactiongroup.co.uk).

The CAG provides useful template letters that you can use to send to your bank, including your initial contact outlining your claim and data requests. It also offers in-depth advice on how to conduct your claim using the courts systems in England and Wales, Scotland and Northern Ireland.

You can also read about successful claims and talk with other people in the same boat.

Think about your approach

It’s tempting to write the bank a stroppy letter - no doubt a few landed on your doormat when you incurred the charges originally. Sadly, this approach will get you knowhere.

Be businesslike, professional and polite. Keep control of your complaint. You are the one setting the timelines for action, you are the one who will not stand for procrastination or lack of co-operation. If letters are ignored, follow them up with a phone call. Impress upon te bank the fact that you are familiar with the legal last resort and willing to go that far.

Work out what you’re due

If you have only recently been on the wrong end of high charges, or want to deal with a one-off charge, send your bank a letter politely detailing the situation.

If nothing happens, or the bank sends you back a letter claiming the charges are fair, call them. If they don’t play ball, you should proceed with the steps outlined below.

Build your case

Before you make a more detailed, formal claim, open a current account with another bank. If your present bank stumps up a substantial amount to compensate for unfair charges, it might close down your account. Sounds childish, but it has been known to happen.

If you don’t have all your statements going back six years (and who has?), see how far back into your account’s past you can look via the online banking system.

If you still draw a blank, send the bank a Data Protection Act request for the info. CAG provides a template letter for this.

Banks can charge up to £10 for giving you this information. Perhaps unsurprisingly, they nearly always charge the full amount. You are advised to send a cheque for £10 with your initial request, in order to head off any delaying tactics. Banks like delaying tactics.

If you do not receive the data within 40 days, call the bank. If nothing happens, complain to the Information Commissioner’s Office (www.ico.gov.uk).

CAG suggests that you should at this point also begin a court action to seek compliance with your disclosure request by means of a Court Order.

Once you have the information you need, present the bank with your case, by means of a letter containing a summary of what you believe you are due.

Provide exact dates and the circumstances that led to you being charged. Ask if there is a form you need to fill in to make a claim against them. If you want a speedier settlement, ask for a smaller percentage of what you believe you are owed.

What happens next?

The bank will either repay the money you have paid in charges, or ignore your claim. If it takes the latter course, you’re heading for a court showdown.

The courts

If you are claiming less than £5,000, your case will almost certainly go through the small claims system. The attraction of this system is that you will not be liable for costs.

The easiest way to pursue your claim in England and Wales is by using the online Money Claim service (www.moneyclaim.gov.uk). This method is faster than attending the County Court in person.

It allows you to make claims and costs between £30 and £120, which will be refunded if you are successful.

If the bank fails to acknowledge your claim, after 14 days you can ask for a judgement against it and win by default. If it acknowledges your claim, it has 14 days more to enter a defence. If they fail to do this, you win by default.

In the unlikely event that the bank enters a defence, you will be sent a Court Allocation Questionnaire. Fill it in and send it back to the court within a week. Send a copy to the bank.

There is a strong chance that when the court date comes around, the bank will not send a representative, thus allowing you to win by default. Remember, the last thing the banks want is for legal precedent to be set.

What if they still won't pay up?

If, after all this, the bank doesn’t pay up, you can by rights send a bailiff to collect the monies, again via the Money Claim website. Hopefully, if this eventuality comes to pass, you will have set up a current account with another bank.

Scotland and Northern Ireland

The small claims system works differently outside England and Wales. In Scotland the maximum claim is £750 and you can reclaim a maximum of five years’ worth of charges.

In Northern Ireland the maximum claim is £2,000. Find out more about the NI system at www.courtsni.gov.uk.

Information on the Scottish system can be found at www.scotcourts.gov.uk.

Can I charge interest?

If you win via the courts, you can add 8 per cent interest on to the recouped charges, from the date you were ’deprived’ of the money (that is, the date on which the charges were deducted from your account). You can not compound the interest.

Will my credit rating be affected? The fact that you were overdrawn may be recorded on your credit file. However, the fact that you claimed back unfair charges is not recorded. Your bank will almost certainly retain a note of the action you have taken though, and this could affect future dealings with them.