Banks fight back on court action

More banks are fighting back against the growing number of consumers who are using the courts to force them to repay penalties.

The charges are made when customers go overdrawn or have too little in their accounts to meet payments but the Office of Fair Trading has said consumer law only allows the banks to recover their actual costs not impose a penalty as well.

Lawyers and consumer groups claim penalty charges of £30 or more break this law and some customers have got back thousands of pounds by threatening court action

Banks and building societies pay up rather than go to court but some - including Abbey and Nationwide - are now closing the accounts of customers who sue them.

Another, Alliance & Leicester, confirmed to BBC Radio 4's Money Box that it had already closed the accounts of dozens of customers who had taken similar steps.

"The cost of fighting the court case, of having the litigation... is not worthwhile"
Ginny Broad, A&L

Ginny Broad, its head of corporate communications, told the programme: "We are talking about people who are very happy to accept the benefits of the Alliance & Leicester current account but aren't happy to keep their side of the bargain, which is to run their account responsibly."

And she defended the practice of paying up then closing the account rather than going to court.

"The cost of fighting the court case, of having the litigation and so forth individually is not worthwhile... our charges reflect the overall level of costs... We believe [they] are both reasonable and lawful," she said.

But the campaign to recover charges is growing.

'Rule of law'

One bank customer, Robert, told the programme he had recovered more than £3,000.

"I went through about the last five years and added up all these bank charges... and was horrified to discover that it came to about £2,500," he said.

"Then I calculated the interest, and I wrote to the bank and said 'You owe me £3,000 give it back'. The bank said 'we will give you £2,000'. So I said 'No, I want it all'. They bottled out and settled in full - [a total of] £3,200."

"There are an enormous number of people who have massive difficulties... regularly having their accounts plundered"
Marc Gander, Consumer Action Group

Marc Gander of the website Consumer Action Group said they are not exploiting a legal loophole just demanding their rights: "There is a very clear rule of law that says that the banks are only allowed to make certain charges."

"Once the charges start coming in and particularly if one is on a tight budget it is very difficult to stop the spiral.

"There are an enormous number of people who have massive difficulties, who are on benefits, and who are regularly having their accounts plundered by the banks with impunity.

"I really want to see honest treatment of people [and] a return to the rule of law."

BBC Radio 4's Money Box was broadcast on Saturday, 10 June 2006, and will be repeated on Sunday, 11 June at 2102 BST.