surviving the recession

The Court of Appeal today ruled against the banks over bank charges. At the heart of the ruling is legislation going back almost a century which states that if you go overdrawn, the banks are allowed to charge interest, and they can also make a charge to cover the costs of informing you that you were overdrawn - but they can’t charge more than their costs (i.e. they can’t make punitive charges). Most bank’s were  charging about £30 to send the letter out, in addition to the interest charged, when the letter cost at most £2 (they are automatically generated and even if sent first class, the cost of postage and paper won’t come to £2).

Last year, the Office of Fair Trading took the banks to court to challenge the way they were levying high charges for sending out letters. They won, but the banks appealed. Now the appeal court has ruled in favour of the Office of Fair Trading.

What does this mean? It means that banks can no longer charge over the odds for sending out letters (though the banks are pondering another appeal). It also means that you should be able to reclaim charges levied on your current account over the last six years.

The Guardian newspaper has helpfully drawn up template letters that  you can use to reclaim your charges. I would advise people to go ahead and reclaim - but before you send off your letter, open another current account with another provider just in case your bank pays you back your charges but decides to shut your current account in revenge.