Bank charge revolt ñ where do you stand?

Banks are being besieged with customers demanding refunds worth hundreds of pounds on extravagant overdraft charges for their current accounts. Complaints are flooding into the Financial Ombudsman at an alarming rate as anyone who has been hit with a penalty fee for going beyond their overdraft limit could be entitled to some money back.

But all the furore has left many customers unsure of where they stand. Are you entitled to a refund? Do you want to make a claim, but don’t know how? Can you get in trouble for trying?

MoneyExpert.com explains what you could get back and how best to manage your current account to avoid getting stung in the first place.

So how do I know if I can claim?

The first thing to work out is whether or not you’re due some cash back. Penalty charges can be incurred for unauthorised overdrafts and unpaid items like bounced cheques, standing orders or direct debits.

You can claim if you think you have been charged for any of these over the past six years of charges (or five if you live in Scotland).

What’s the best thing to do?

If you’ve got all your bank statements from the past six years, you’re not only incredibly organised but also incredible fortunate. All that diligence will now pay off because all you have to do is highlight all the charges you’ve incurred, total it up and then fill in a compensation form, available from the BBC –

If you don’t hear from your bank within fourteen days, you’re entitled to file a claim through the small claims court. At this point your bank will be obliged to defend itself against your claim.

The guesstimate approach

Ok so you’ve let things slip a bit and you’re "not sure" whether you’ve kept every last bank statement from the past six years. If you’re convinced you’ve been charged, you are still entitled to claim – you can submit an estimated claim based on the evidence you do have. So, for example, if you can prove you were charged five times in a year and think that pattern was likely to have been repeated every year, you could claim for 30 charges in total.

There’s a different form to fill in for estimates – again, go to the BBC link and scroll down the page for more details.

The bottom line is if your claim is small enough banks are much more likely to settle up quickly to cut admin and legal bills – but every lender is different. If you think you’ve got a large claim, be prepared to go through the courts.

Avoiding charges altogether

If you’re finding that by the end of the month things are usually a little tight then you should agree an overdraft limit with your current account provider immediately. This will prevent any charges just for going into the red, although some accounts will have a small ‘buffer zone’.

Your bank will know how much comes in and goes out and should be able to recommend a suitable limit to start with. But if you go overdrawn without agreement or beyond your limit you’ll normally be charged interest on the amount – and a fee on top. So watch your spending if you’re on the brink.

While some accounts may offer overdrafts on an interest free basis until you hit an agreed sum, others may provide an overdraft rate for a set period of time, particularly if it is part of an introductory offer to entice you in.

Back to the charges

If you really don’t have the time to make a claim there are several companies that might be able to do it for you. They tend to charge you a proportion of the amount you claim as a fee.

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