Bank Charges: Is Your Bank Overcharging You For Your Overdraft?
Unauthorised overdraft
fees. These are three words that worry every bank customer. An
unauthorised overdraft fee is the fee charged by a bank when customers go
over their overdraft limit.
These fees can be very
steep, with some banks charging high premiums for customers who exceed an
agreed overdraft limit by as little as a few pence. A recent consumer
report suggests that bank customers paid more than £4 billion pounds in
unauthorised overdraft fees in 2004.
Scale Of Overdraft Fees
The BBC have reported that
the seven major banks charge unauthorised overdraft fees of £25 to £38
pounds. Interest rates on the unauthorised amount can also be high. While
some banks charge under 8% interest, others have interest rates that hover
around the 30% level.
The banking industry has
been slated for this practice by customers who feel they have been treated
unfairly. The Office For Fair Trading has also criticised banks for
overcharging customers for unauthorised overdrafts. Late payment fees for
credit cards have also been criticised. The OFT suggests that late payment
fees for credit cards should be no more than £12 and should only cover the
administration fee.
Getting A Refund
Consumers who feel they
have been overcharged by their banks may be able to receive a refund if
they go through a time consuming process.
First of all, consumers can
use the Data Protection Act to request details of all charges on their
account over the past six years. Next, they need to inform the bank that
they intend to sue in County Court to get this money refunded.
Are Unauthorised
Overdraft Fees Legal?
There is some question as
to the legality of unauthorised overdraft charges. Penalty clauses (such
as unauthorised overdraft charges) are illegal under breach of contract
law. However, banks do have the right to claim damages from customers who
breach their contract with the bank. To avoid going to court every time,
most banks write these charges into the contract. They are then able to
raise those charges at regular intervals.
The banks see the
unauthorised overdraft fee as a fee for services rather than a penalty.
This could alter the legal position.
In many cases, it is the
people who can least afford it who suffer these overdraft charges. This
can become a cycle, with some people having to pay unauthorised overdraft
fees month after month.
Help With Your Banking
Rights
Consumers who want to find
out more about their banking rights should check information from the Bank
Action Group, a self-help organisation for banking customers. This
organisation can guide consumers through the lengthy process of recovering
unauthorised overdraft fees from their bank.
Many organisations say that
the banks should make it easier for consumers to see what charges might be
applied to their bank accounts. Until they do, consumers should read the
fine print as the terms and conditions of each bank account contain
information about charge that might apply. Finally, when banks send
variations of terms, it is useful to read these to see what new conditions
might apply.
Joseph
Kenny writes for the
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