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Bank Default Charges
Since the beginning of 2007 there has been a great deal of media coverage relating to the debate between banks and their customers on the lawfulness of bank default charges. Default charges are applied by banks when a customer enters into unauthorised overdraft, has a failed Direct Debit / Standing Order, or when a cheque bounces.
Banks apply charges typically in the region of between £25 and £35 for EACH default. Is this a fair amount to charge a customer, even when the customer goes a penny into their overdraft?
We believe not. By Law if there is a breach of contract between two parties then a charge imposed should not exceed the cost of the breach. That is to say that Banks should only apply penalty charges that directly reflect the cost incurred by them. Does it really cost the Banks £35 to send an automatically generated letter with a franked stamp?
Banks are believed to have generated around £5Billion over the last six years from these kinds of charges!
Bank Default Charges – THE TEST CASE
In early 2006 there was a similar debate relating to charges imposed by Credit Card companies on their customers. The Office of Fair Trading (OFT) investigated this and ruled that the (default) charges imposed for late payments and exceeding credit limits were unfair. The OFT set the default charge at £12.00 maximum.
On 27 July 2007 the OFT and some major banks agreed to a test case in the High Court. This is to be held on legal principle meaning that no individuals are actually going to court, but the case will determine whether bank default charges are lawful or not. It is widely believed that the case will return a verdict similar to that in the case of Credit Card charges, but this is not certain.
Up to the date that the OFT agreed the test case many companies and individuals had submitted claims to reclaim default charges, the vast majority of which were successful. However, how the test case affects potential claims now is that banks do not have to pay out until a verdict is reached. This is expected between January and July 2008.
This Test Case does not affect Credit / Store card charges claims! These charges can be reclaimed immediately.
Although banks may not be obliged to pay out yet, we do not advise bank customers to simply wait until the conclusion of the test case before submitting a claim for the following reasons:
- If you are suffering FINANCIAL HARDSHIP the bank may be forced to deal with your request by law and may not be able to wait for the conclusion of the test case;
- When a claim is submitted the bank will create a dated record on their systems. Claims are likely to be dealt with in date order so the earlier you make a claim the sooner you should be paid out;
- Not all banks are involved in the OFT test case and even those that are involved may agree to settle early;
- Claims can only date back 6 years! If the test case is not concluded for another 12 months you can potentially lose 12 months charges and interest claims.
Payment Protection Insurance (PPI)
It may be possible to reclaim PPI on personal loans, secured loans, credit cards, store cards and catalogue accounts that customers have held within the last six years. It all depends on whether the policy can be classed as mis-sold. There are many ways that a policy MAY be classed as mis-sold. For example:
- Your policy included Unemployment Cover and you were self-employed, unemployed, redundant or retired at the time you took the policy out;
- You were told that the PPI was compulsory or you didn’t even know that you had taken it out.
- You were sold a ‘single premium’ policy, meaning that the whole cost of the insurance was added at the start of the agreement. You therefore pay interest on the loan AND the insurance!
- If your policy provider has already been fined by the Financial Services Authority (FSA) for treating customers unfairly. Companies fined so far include Capital One, GE Capital Bank Ltd., Loans.co.uk, Redcats, Regency Mortgage Corporation and Hadenglen Home Finance Plc.
- You had Medical Conditions in the past and were not informed that your policy would not be covered for any of those conditions. Policies could be void if your policy provider did not mention medical exclusions at all or you were NOT told that this was an important part of your policy and NOT asked to disclose past medical conditions.
Mortgage Exit Admin Fees (MEAFs)
MEAFs are charged when you change mortgage lenders. If you have changed mortgage in the last six years you may be entitled to claim a refund of the difference that the lender said they would charge you to exit and the amount they actually did.
Boomerang Claims will handle your claim every step of the way. We deal with the companies on your behalf so you don’t have to. We don’t charge any upfront fees for Bank Charge, PPI or MEAF reclaiming and operate on a no win no fee basis.
To receive an information pack containing all you need to begin your claim please complete the Form below and click the ‘SEND’ button. The information pack contains full details of our pricing structure.
