The terms ‘bank charges’ and ‘bank fees’ may sound similar, but they are different.
Bank Charges often relate to charges applied to personal current accounts, such as charges for exceeding authorised overdraft limits, or making payments (or attempting to make payments) where no authorised overdraft exists.
Bank fees are paid in return for services provided by the bank, such as monthly fees for a packaged bank account.
The Financial Conduct Authority (FCA) estimated in 2011 that a third of the revenue gained through personal current accounts was obtained through overdraft charges and the interest on overdrawn balances.
Recent research by the FCA highlighted some of the issues surrounding overdrafts:
- Consumers don’t realise how much overdrafts can cost
- Consumers are confused by unarranged overdrafts
- Consumers often don’t see arranged overdrafts as borrowing and quickly become accustomed to using them.
- Repayments are often driven by income coming in rather than as scheduled payments to clear an outstanding balance
- Raising overdraft limits may be beneficial to the Banks but may be perceived by customers as their bank ‘trusting’ them.
There may be circumstances in which you can still reclaim Bank Charges. If you feel that you have not been charged in line with the terms and conditions of your Bank Account, or if you are experiencing financial difficulty, in the first instance you should contact your Bank. If your Bank does not satisfactorily address your complaint, you can refer your complaint to the Financial Ombudsman service, but please be aware that they will not uphold complaints unless justified.
Bank Fees on Packaged Bank Accounts
When you sign up for a bank account you may be offered a packaged bank account. These are the accounts that have a monthly bank fee, some of which are priced up to £25. The extras that are often available with these packaged bank accounts include insurance policies, ticket discounts, and a better interest rate on personal loans and savings.
The FCA have provided guidelines to consumers thinking about whether a packaged bank account is suitable. The five step guideline covers:
Step 1: Assess whether or not you would actually use the additional benefits that a packaged bank account offers or indeed whether you already have these benefits from another source.
Step 2: Contact your bank or building society to check whether you would be eligible to claim on any of the policies such as the insurance policies.
Step 3: To understand whether or not you are getting value for money, compare the price of buying the individual items that you would want to use against the annual cost of the Packaged Bank account.
Step 4: Check whether you need to activate benefits or register your details before any of the cover on the policies come into force.
Step 5: During the course of taking out a packaged bank account and paying a monthly fee, check whether your circumstances have changed in case you will no longer be eligible to claim on an insurance policy included in the packaged account.
There may be circumstances in which you can ask your bank to reconsider applying Bank Charges if you are in financial hardship and the charges are adding to your problems. Contact your Bank initially and if the situation remains unresolved to your satisfaction, then you can contact the Financial Ombudsman Service.
Bank Fees charged by your Bank or Building Society for a Packaged Bank account relate to optional services. If you feel that you were mis-sold your Packaged Bank Account, you can complain to your Bank and ask them to refund the fees. If you are subsequently unhappy with the outcome, you can ask the Financial Ombudsman Service to look into this for you. Details can be found on the Financial Ombudsman Service website.
If you feel you don’t have the time or the confidence to handle the complaint yourself, that’s where we come in. We can take care of everything in relation to the management of your claim. Whenever appropriate we will also refer a Packaged Bank Account complaint rejected by your bank to the Financial Ombudsman Service and continue to pursue your claim.