How to claim your bank charges back - a step by step guide

The Office of Fair Trading OFT has now delayed its decision about the need for banks to reduce the level of penalty charges on current accounts, but you'll find out here how to claim bank charges back as you're still free to pursue a claim against your bank if you think you've been unfairly charged. The OFT has announced it is extending the scope of its six-month investigation into overdraft fees to cover all aspects of retail bank pricing.

Last year the OFT ruled that many bank penalty charges, for instance the fine of £39 for exceeding an authorised overdraft limit, are excessive and in most cases shouldn't be more than £12, the argument being that the penalty or fine should reflect the true cost to the bank of the customer's transgression. The OFT ruling extends back six years, so you'll want to find out how to claim bank charges that may have been unfairly levied.

The banks rake in an estimated £3.5 billion plus in penalty charges a year. Operating profits are substantial; for instance it's been reported that Barclays last year made a profit of £225 a second or £86 for each of its 14 million customers. Earlier this year Lloyds TSB announced profits of £4.25 billion.

The banks are not happy with the mounting tide of refund claims which now seems to be reaching a tsunamic level. Yet every single disputed claim so far has been settled outside court, with banks apparently unwilling to have their stance on current account charges tested before a judge.

The Financial Ombudsman is said to be frustrated by banks "buying off" at the 11th hour complaints that come before the Financial Ombudsman Service FOS or small claims courts. Settlements on sums in excess of £1,000 are not uncommon. Until a case is fully tested in court, the law is unclear about whether banks have a right to levy such penalty charges or are acting unlawfully.

The current scenario, then, suggests that persistence in making your case for a refund of bank charges should pay off. But be prepared for delaying tactics, prevarication and even intimidation depending on your bank in the form of threatened account closure.

You won't be alone in seeking compensation. A few weeks ago it was reported that more than 150,000 customers had successfully claimed back charges and the FOS says it is getting around 1,000 queries a day on this issue.