Lifestyle tips: Don’t bank on a refund

It’s a lot of money, £400m, even to the big five high-street banks (profits last year £38bn). But that’s how much they’ve refunded to customers in dubious overdraft charges in the past six months. Until now they have refused to give any information. But when they reported their half-year results to the stock market they had to confess.

The sums ranged from £36m for LloydsTSB to £116m for HSBC with the other three averaging £80m to £90m each.

Sorry, did I say these were refunds of dubious charges? What I meant to say was they were “goodwill payments” (RBSNatWest) because of “reluctance to engage in legal action against customers” (HSBC).

Hmm. Over the past year the reclaim-your-bank-charges bandwagon has rolled on and millions of people have claimed refunds – and got them. Faced with this unprecedented customer revolt – and just before they had to admit to the City how much they had paid out – the banks did a deal with the Financial Services Authority.

It went like this. The Office of Fair Trading would bring a test case that the banks would defend so the courts could decide whether charging £39 for going 1p overdrawn was legal. And all claims that had not reached an offer would be put on hold. Even the financial ombudsman has agreed to stick them in his pending tray until the judges sort out the law.

That may take a long time. A case like this – funded by the taxpayer on one side and the deep pockets of the banks on the other – is bound to go to the House of Lords for a final ruling. We may not see a decision this decade.

But if you have been charged large sums for straying into the red you should still put in a claim. It will be held up until the court ruling. But once the claim is in it cannot be ignored. And if the charges were made four or more years ago you will avoid the risk that by the time the courts decide, your charges will be too old – more than six years – to reclaim.

And for the future? Try not to go overdrawn without permission and switch banks to one that gives you a generous buffer if you do.

Paul Lewis is a freelance writer who presents Money Box on Radio Four.