PENALTY CHARGES

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If you don't get a refund (some banks do refund straight away), then now go to the moneyclaim site and fill in the form. Moneyclaim is the internet based court system allowing you to easily claim back money you’re owed. (There’s a pro forma of what to fill in on the consumeractiongroup website).

There are fees, but you will get them back from the bank when they refund your money. If you are receiving benefits of any kind, you may be exempt from the fees. If you don't have a credit or debit card then pop-along to your nearest county court and pick up an N1 form, it's exactly the same as their website, but on paper, and you can pay in cash when you return the form.

N.B. The court fees range from £30 - £120 depending on how much you are claiming, it’s much cheaper to do it on line.

The bank will:-

1) Ignore the claim completely, this is their best bet, they can claim incompetence as the reason for not attending court, you win by default after 14 days if they do not enter an acknowledgment of the claim.

2) Pay the claim in full, including interest and court fees (if they offer to settle for anything less, then refuse, you will get the full amount).

3) Acknowledge the claim, this buys them a further 14 days to enter a defence. Some banks will acknowledge the claim and then pay up. They know you MEAN it now! For every threat that gets this far, there are probably 10 that give up long before this point and they know it. Some will acknowledge the claim, but 'forget' to enter a defence, after 28 days from the date you started proceedings you will have won by default and you will get your money back. If you don't get your money back in this event, you have every right to send the bailiffs in, this can also be done from the Moneyclaim site.

4) Acknowledge the claim, and then on the 26-28th day, enter a defence (don't worry, they're the ones STILL trying to scare you off).

If the result is anything other than the bank entering a defence, you’ve won, so pat yourself on the back.

However in the rare event it does enter a defence, just do nothing. The next thing that will happen is that you will receive a Court Allocation Questionnaire, fill this in (very simple and very quick) and return it to the court (you must do so within 7 days of receiving it). Pay any additional fees at this point. Send a photocopy of the questionnaire to the bank, it is debatable whether you need to do this or not, but it's better to be safe than sorry over the price of a stamp.

The court will now set a date (if the bank hasn't already given your money back by this point, and most will have done). Some (actually only one has ever got this far) might actually attempt to win in court, they may claim that the charges are for an extra service and therefore not a penalty, and thus legally enforceable. If this happens, go to the forum at consumeractiongroup

For you to be 'safe' from paying the banks legal costs should it get this far and you lose (extremely unlikely that they would win, remember only one bank has ever taken this to court and there is a lot of evidence that has been gathered since proving these charges as punitive in nature now), don’t claim for more than £5,000, that way it would be heard in the Small Claim Track, where no-one is eligible for the legal costs of the other.

Also, it pays to open another account somewhere else in case they turn nasty and close your accounts and/or demand overdrafts be paid pack immediately, some have been known to do this on occasion, although most don't. If you have the choice, stay with the same bank, next time they charge you for going 8p over your limit, they know that your threat is real. (Source: Money Saving Expert)

Tens of thousands of bank customers are preparing to sue the high street giants for the return of millions of pounds in "illegal" penalty charges. The customers claim that penalty charges of up to £35 for slipping a few pence over an overdraft limit and £39 for a bounced cheque are in flagrant breach of the law. Under consumer legislation passed seven years ago they are not allowed to charge "disproportionately" high sums and can only cover their costs.

The unprecedented revolt has already forced the banks to hand back millions of pounds. However, the cases have only started to hit the banks in large numbers in the past six months. So far the biggest successful claim is thought to be £17,000 but the average is about £1,000. The banks are not known to have contested a single case in open court, leading to claims that they are "running scared" of the implications of a judgment going against them.

However, campaigning groups say the OFT has been slow to protect consumers. Making a claim takes about two months and a £80 court fee is returned if the claim is successful or undefended. The banks all said their charges were fair and could be avoided if customers stayed within the agreed terms of their bank accounts. (Source: Mail on Sunday, Nov/06)

Banks which close the accounts of customers who take them to court to reclaim their bank charges have been criticised by the Financial Ombudsman. In an adjudication it said the Alliance and Leicester's closure of one such customer's account was neither fair nor reasonable and it recommended the bank pay him £125. The ombudsman said the bank should not have closed the account simply because he had taken them to court. "I do not consider that it was either fair or reasonable for Alliance & Leicester to use the closure of an account as a way of deterring or punishing this customer for complaining," the adjudication said.

Tony Boorman, principal ombudsman for the service, said, "We strongly believe that customers have a right to complain. I'd be concerned about any financial institution which stood in the way of this and took action to actively discourage people from complaining." Alliance & Leicester said it had agreed to pay the £125 recommended by the ombudsman but the adjudication would not change its position. It said customers had a right to complain and accounts are only closed after their relationship with the bank had irrevocably broken down.

Nationwide also closes the accounts of customers who take them to court to reclaim their bank charges and estimates it has closed fewer than 500 accounts. Executive director Stuart Bernau said it will continue to do so in some circumstances, "When someone takes us to court, we would consider that the relationship has broken down. We would not close an account in retaliation, only if we believed the relationship had broken down over a long period of time." (Source: BBC News, Feb/07)