PENALTY CHARGES

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More than half of customers planning to fight their bank over "illegal" fees are demanding payouts greater than £1,000 and thisismoney.co.uk, found that some complainants are seeking to reclaim sums in excess of £5,000. A poll of 3,500 consumers by the finance website showed that 53% were seeking more than £1,000 back from their current account provider, with 33% looking for recompense greater than £2,000. In addition, 7% of potential claimants are demanding sums upwards of £5,000 for charges they were forced to pay over a six-year period.

Sascha Hutchinson, campaigns editor for thisismoney.co.uk, said, "The whole issue has been a steep learning curve for the banks. They went too far with additional charges they introduced in 2005 and people refused to take it. Then they tried to keep the reclaiming loophole quiet, they tried to intimidate customers by closing their accounts, and all it did was attract even more publicity and encouraged even more people to reclaim. It has been a joy to watch in terms of people power at work, it is something that couldn't have happened in such a big way without the internet." (Source: Mail on Sunday, Feb/07)

Banks and credit card companies are creaming more than £400m a year off the British people through extortionate late payment and credit limit charges. Consumer watchdog Which?, formerly the Consumers' Association, said one in four consumers were charged in 2004 for late payments or going over their card limit. Most lenders charge between £20 and £25 for late payments, which the organisation claims is excessive because late payment letters are automatically generated and penalty charges added to the next bill.

In a scathing attack on the financial services industry, Which? also accused lenders of raking in at least £1bn a year through loan payment protection insurance for personal loans. It said the insurance is often mis-sold and offers limited cover. It added lenders regularly target vulnerable consumers to encourage them to rack up debt.

Which? spokesman Malcolm Coles said, "The credit industry has an alarming number of tricks up its sleeve to wring every last penny it can out of its customers. Lenders seem to have no qualms about persuading people to take on more debt than they can afford and they will carry on doing it as long as they can get away with it."

He said the Consumer Credit Act should be reviewed to include tougher measures on interest calculation methods and data sharing. The Association for Payment Clearing Services, which represents banks and lenders, dismissed the organisation's claims, insisting the industry had done much to clean up its act since 2003.

Spokeswoman Sandra Quinn said, "If they had said this 18 months ago then we would have held our hands up, but the industry has improved since then." Quinn said the introduction of summary boxes on financial products and health warnings on credit card statements had aided borrowers.

She added that new guidelines governing the distribution of credit card cheques and credit limit increases are due to come into force. The British Bankers’ Association said it is not in the banking industry’s interest to encourage people to over-stretch themselves. (Source: Mail on Sunday)

A crackdown on current account penalty charges could slash the cost of banking for millions of customers. The Office of Fair Trading is telling banks and building societies they must follow guidelines on excessive charging for some services or face a formal investigation. This follows the OFT's ruling that penalty charges of up to £25 on credit card customers who pay bills late or exceeded credit limits were unfair and excessive.

It now wants banks and building societies to look at other charges and ensure that they reflect the amount of work and time incurred in dealing with the customer. Coming under the spotlight in particular will be fees for exceeding authorised overdraft limits and for bounced cheques and direct debits which can cost £30 or more for each mistake. An increasing number of account-holders have begun to take banks to court over what they consider to be excessive penalties.

A frequent gripe occurs when loyal long-standing customers are fined for slipping into the red for as little as a few hours. Lloyds TSB and HSBC both offer some reprieve from these charges. Lloyds will waive the £30 excess overdraft fee if it is the first time you have slipped into the red that year. It will also only charge you a maximum of £90 in fees that month. Its fee for bounced cheques or direct debits is £35.

HSBC will not charge for the first time you go overdrawn in six months or if the total owed is less than £10, otherwise it will charge £25 and £30 for bounced payments. Barclays will give you a £5 buffer on your account limit, but if you go above this then you will have to pay £25 and £30 for a bounced payment. Alliance & Leicester charges £34 if a transaction fails due to lack of cash.

Nationwide has the cheapest fees, charging £15 for a unauthorised borrowing and £28.50 for bounced payments. With NatWest it is £28 and £35. Halifax charges £28 for going into the red, £30 for subsequent direct debits that push you further into the red and £39 for returned items - you can be fined three times in any day. Abbey fees are £30 for unauthorised borrowing and £32 for returned items. (Source: Mail on Sunday)

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