Banks branded 'unlawful' over £30 penalty fees

Banks branded 'unlawful' over £30 penalty fees

Banks routinely charge customers £30 in penalty fees for a service that costs them £4.50 to carry out, according to a study out today.

BBC2's The Money Programme, which airs tonight, will look into allegations that financial institutions overcharge customers who default on payments.

The programme found that it costs banks no more than £4.50 when a customer's cheque bounces and a maximum of £2.50 to deal with unauthorised overdrafts, but the banks mark up the penalty fees to around £30.

It has been alleged that the banks act unlawfully by imposing penalties at a higher rate than it costs to process defaults, and there have been calls for the financial regulators to investigate.

Reacting to the findings, Stephen Hone, campaigner and founder of the Penalty Charges campaign website, told the programme: "It clearly shows the banks have been scamming people for years on these charges and they are totally unlawful, so it shows people that they can go and claim their money back."

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In recent months, disgruntled consumers have been prepared to take their banks to the small claims court to reclaim money taken from them in penalties.

A template letter to begin the process of doing so has been downloaded 180,000 times from the consumer website MoneySavingExpert.com, but to date the banks have settled out of court rather than seeing the proceedings through.

Barrister Kieron Beal of Matrix Chambers, speaking on the programme, said this suggested the banks found it difficult to justify the charges they impose.

Walter Merricks, the chief ombudsman at the Financial Ombudsman Service, said an investigation into the issue was possible.

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