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Last Updated: Monday, 16 April 2007, 15:25 GMT 16:25 UK
Man recovers 35,988 from NatWest
By Ian Pollock
Personal finance reporter, BBC News

The cheque for 35,987.94
NatWest is owned by the Royal Bank of Scotland
A businessman from Norfolk has recovered a record 35,987.94 from NatWest after accusing it of charging him unlawful overdraft fees.

The man, who wishes to remain anonymous, had challenged the fees that the bank had levied for bouncing cheques from his company.

NatWest said it was settling the case only because its legal costs were becoming too high.

It is just the latest example of a bank repaying such penalty charges.


The businessman is one of a rapidly-growing number of people who have found that their bank has caved in to a claim for a refund of their current account charges, rather than let the case go to court for a full hearing.

It certainly is a spectacular payout
Marc Gander, Consumer Action Group

Campaigners claim that the banks have adopted this strategy because if they were ordered by a court to reveal just how much it actually costs to bounce a cheque, they would be forced to admit that it was in the region of 2, rather than the 25 to 30 unauthorised overdraft fee that is commonly charged.

"It certainly is a spectacular payout," said Marc Gander of the Consumer Action Group (CAG).

"It is the biggest one I know of so far that has been successful."

Small businesses

The businessman in this case - who we shall call Bob - started his windows and conservatory business in 1999.

At times I was paying 2,000 to 3,000 a month in charges. I felt I was being ripped off
Bob, Norfolk businessman

Today it employs some 20 people and has an annual turnover of more than 1m, with a healthy bank balance.

But in its early days the company experienced a common problem for small businesses that have just started up: cash flow.

There was little money available to fund the day-to-day costs of running the business, while waiting for customers' cheques to clear.

Bob says that the NatWest, which is owned by the Royal Bank of Scotland, would bounce his cheques or stop his direct debit payments when he tried to draw on money from customers whose cheques had not yet cleared.

Over 28 months, from 2000 to 2002, he was being charged fees on his account almost every week - and at 30 a time.

"At times I was paying 2,000 to 3,000 a month in charges," said Bob.

"I felt I was being ripped off - they were quite happy to take bank charges from us but were not willing to give us an overdraft."

Legal action

Bob changed his bank account to HSBC in 2004, but late last year came across the idea of demanding the charges back while browsing the internet.

Using standard letters from the website of the Consumer Action Group, he sent off a first demand in January this year for 24,000 plus 12,000 interest.

With no response he then started a legal action using the government's Money Claim Online service.

A case conference had been scheduled for 11 May.

But out of the blue a cheque arrived last Friday, in full settlement of the claim.

Solicitor's letter

"Our client considers that your challenge to its charges would fail in court," said the letter from NatWest solicitors, Cobbett's of Manchester.

Without admission of liability our client is prepared to settle this matter in full to prevent incurring any further legal fees
NatWest lawyers

But after saying that the charges were fair, reasonable, transparent and levied in accordance with its agreement with Bob, the bank's solicitors threw in the towel.

"Our client does not believe that your claim has any prospect of succeeding," it said.

"Although our client is confident that it will be successful at a final hearing, its legal fees will almost certainly outweigh the value of the claim.

"As such our client must take a commercial approach to such claims," it went on.

Then came the towel.

"Without admission of liability our client is prepared to settle this matter in full to prevent incurring any further legal fees."

All this drew a wry smile from Marc Gander of the CAG.

"The general message is that the banks are paying out substantial sums to avoid going to court," he said.

"This idea the banks are not finding it economically viable to contest the case is just not credible."

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