It’s not often that you get to stick it to the man, but here in the UK a minor revolution is going on, and millions of people are set to benefit from it.
For several years now, banks in England have been levying absurdly high charges against their customers for stretching over their overdraft limit or for miscalculating a direct debit payment. In most countries this isn’t even possible, but in the UK it is, thanks to a highly inefficient banking system.
Account balances in the UK are never completely up to date, and debit card use for example can take several days to show up in your account. In Canada and the US for instance, it is impossible to use a debit card that will take you over your limit. The system does a live check against your account, and all transactions (apart from cheques) reflect instantly in your account. You just can’t go overdrawn.
The charges by the UK banks for making a mistake (thanks to their inefficient system) are insane… My bank, NatWest, charges £38 ($75)for each debit transaction that takes me over my limit, and an additional £28 for the month where the mistake happens.
Since most people have half a dozen or more direct debit instructions set up and make frequent debit card transactions, it’s all too easy for the charges to quickly rack up. Earlier this year for example I was charged £76 in one day for two direct debit instructions that went over my limit, plus the £28 fee. Thats £104 ($205) for a simple mistake, and all thanks to the banks own inefficient tracking system.
Relief is gleefully at hand because it turns out that the charges are in fact illegal. UK law states that where there is a breach of contract between two parties (the bank and their customers), the disadvantaged party (the bank) cannot charge the other person more than their own costs associated with the incident. Since it costs almost nothing for a bank’s computerized system to add a line to your bank statement, the charges are totally out of whack with reality and thus, illegal.
For my part, I’ve been hit by these charges for years. Starting a business of course is always challenging, and one thing that is pretty universal for any entrepreneur is sailing a little ‘close to the wind’. With the compounding factor of the delayed reporting by the banks, in the UK it’s virtually impossible to avoid these charges.
Under statute of limitation laws, people can claim back the illegal charges for up to six years, and it gets even better. Under UK law, you can also claim interest at the rate of 8% from the time each charge was levied.
Fortunately for me I’m a pack rat, and I’ve kept all my bank statements. I just spent the last two hours going through them, and to my no insignificant delight, I’m due back £1754 in illegal bank charges. Adding in interest, that sum rises to the rather hefty figure of £2071.18 ($4150).
I can’t tell you how enjoyable the feeling is of calculating interest on money unexpectedly owed to me by a bank. It’s a great feeling.
For anyone who thinks they’ve been hit by these charges I’d strongly encourage you to follow it up. I knew I’d been hit by quite a few charges over the years, but never did I think it would be as much as it was. Even if you don’t have access to all your old bank statements, you can force the bank to provide them to you under Freedom of Information laws. See the article below for more info.
Having a bank account… essential
Not liking banks… universal
Getting your own back on the bank… priceless.
(For an easy-to-follow explanation of how you can reclaim illegal bank charges in the UK, along with a very useful interest charge calculator, see this tutorial on the subject. You do not need to use the services of any of the third-party brokers who’ve started advertising their ‘reclaim bank charges’ services in the press.)