Banking on a Refund?

Bank charges have recently become the basis of a battleground. Over the past few months, tens of thousands of people have reclaimed millions of pounds after accusing their banks of levying illegal charges, going back up to six years. Those charges cover a variety of ‘misdemeanours’: for example, if you go over your agreed overdraft limit, fail to meet the costs of a direct debit, or if the bank bounces a cheque, then you can expect to be charged £20 or more in monthly fees, plus daily fees of up to £8 a day or more, plus cheque return/unpaid direct-debit fees of £25-£35.

In suing their banks, customers argue that these charges are not only excessive, but unlawful, as they do not represent a genuine estimate of the loss a bank incurs, if, for example, an overdraft limit is exceeded. The typical response of banks to claimants has been, and still is, to stall for as long as possible - then usually pay up before the claim gets to court. It has, quite simply, been a big win for the little people.

In recent weeks, however, the battle lines have been more defiantly drawn. In May, Lloyds TSB won two cases against customers suing them for illegal charges. The first case, brought by builder Julian Rudd, was dismissed by a judge at Lancaster county court on 11 May, four days before a judge in Birmingham county court ruled against a similar £2,545 claim from Kevin Berwick.

The failure of both cases appears down to poor preparation on the part of the claimants; nevertheless, the banks have been quick to capitalise on success and launch a widespread counterattack. Financial institutions, including Abbey, the Clydesdale/Yorkshire group, HSBC, and the Alliance & Leicester bank, have reportedly been citing the Birmingham court victory to put customers off making a claim. And they even seem to have some support in the county courts, with Hull District Judge Ian Besford threatening to strike out claims by 20 bank customers suing for bank-charge refunds, on the basis that claimants are unlikely to succeed in light of the Lloyds TSB victory.

If you are still thinking about making a claim against your bank or building society, you may well now be feeling wary. At the very least, the Lloyds TSB cases demonstrate that you need to plan your case carefully and ensure you have all the relevant documentation/evidence necessary to support your claim.

But it is not all bad news. Despite recent court developments in the banks’ favour, most banks are still settling with claimants before cases reach court.

Nor are all judges viewing the banks so favourably as the Hull District Judge. In keeping with most other banks, Lloyds TSB failed to even turn up to the two cases that it won in May, relying purely on its written defence to secure a win. Judges are getting increasingly irritated by these non-shows. At Worcester county court, for instance, a judge recently told one bank-charges claimant, in whose favour he had just ruled, that this was the 50th time that a bank had failed to turn up before him.

This has led to some bank customers adopting a new strategy: asking judges to strike out a bank’s defence as an ‘abuse of process’. With banks often stalling and then settling cases just before they reach court, or with them not turning up at court at all, claimants are arguing that banks are wasting courts’ time. And it is a tactic that seems to be working.

In February, Maria Dobson, lodged a claim against Abbey for £3,865.86. Knowing that Abbey, in common with all other banks, was highly unlikely to turn up on the appointed court day, she put in a draft order, asking the judge to throw out the case on the basis that Abbey was abusing the system. Judge Burness agreed and struck out Abbey’s defence. More recently, in Rhyl county court, Judge Thomas made a similar order against Lloyds TSB demanding that it supply a list of all claims it has defended in court and all those not defended - otherwise its defence would be struck out. Given the bank’s record of non-attendance at such court cases, it was an encouraging sign for claimant Ben Manesh and for all other bank customers hoping to secure bank-charge refunds.

For sure, the process for winning refunds on your bank charges may not now seem as simple as it did earlier in the year. And if you are thinking of making a claim against your bank, you need to ensure you prepare your case thoroughly. But there are still plenty of success stories and victories to suggest that the little people’s fight goes on.