By Paul Lewis
BBC Radio 4's Money Box
Bank charges have been attracting increasing criticism
Bank customers across Britain are being encouraged to challenge penalty charges after claims they are unlawful.
A Scottish law centre supported by Citizens Advice in Scotland has drawn up a letter which challenges the right of banks to charge £30 for going overdrawn without permission or missing a credit card payment date.
Lawyers claim charges at that level break the Unfair Terms in Consumer Contracts Regulations 1999, which say consumers must not be charged "a disproportionately high sum".
Mike Dailly, Principal Solicitor at the Govan Law Centre told BBC Radio 4's Money Box programme that charges of £30 certainly breached that rule.
"The law says if someone breaches their contract, for example you go over your overdraft without permission, the bank's only entitled to recover its actual loss," he said.
"If you get an automated letter from your bank for going over your limit, that costs about 50p. So why should someone get a £36 letter for that transaction?".
His views were echoed by a Money Box listener from Yorkshire.
"The bank put its charges right at the end of the month just before I got paid," he said.
"I didn't have the funds to meet it and so two of my payments bounced and I was charged £36 for each one - that's £72.
"I am a computer programmer. I know what's involved and I think the charges are far in excess of what it costs the banks."
"You get overdrawn £3 and you're charged £36. It's absolutely ridiculous."
But Ian Mullen, Chief Executive of the British Banker's Association (BBA), told the programme that banks were not charging customers more than the actual cost.
"No we're not. The banking systems are geared to an automatic process, so when a cheque or a charge sends an account overdrawn or over an agreed limit this involves manual intervention: to extract the item from the day's work, to research the customer's recent credit profile, and then a managerial decision as to whether to return the unpaid item."
He confirmed that "in the majority of cases" a human intervened in imposing a default charge.
However, Mike Dailly claims customers who have used his letter - which cites case law in Scotland and England as well as the regulations that apply throughout the UK - are getting their charges refunded.
"In most cases the banks are paying up. Some people are getting all their money back," he said.
"For example, I had an e-mail from one saying: 'I used your letter and got £900 back'. Some are getting a percentage of the charges back. What we're finding is the banks are very reluctant to see this come before a senior court."
But Ian Mullen claimed that many of these successes were students who the banks recognised had problems: "We're dealing with students, and banks are very keen to see that students are serviced optimally. We know students today are in financial difficulty."
BBC Radio 4's Money Box was broadcast on Saturday, 18 February, 2006, at 1204 GMT.
The programme will be repeated on Sunday, 19 February, 2006, at 2102 GMT.