Law centre challenge to unfair UK bank charges

Release: Wednesday, 9 March 2005, 11.45am.

Glasgow's Govan Law Centre has launched a website to help bank customers get unfair bank charges refunded.  Which? magazine estimates that UK banks charge customers £3bn each year in unauthorised overdraft charges.  Govan Law Centre believes many of these charges may be unlawful because they are penalties or 'fines'.  The law centre is urging ordinary people to assert their legal rights and challenge unfair bank charges.

At Scots common law a contractual party can only recover money for actual or real loss following a breach of contract.   This is know as 'liquidated' damages and the position in Scotland and England has been clear since the House of Lords case, Castaneda and Others v. Clydebank Engineering and Shipbuilding Co., Ltd. (1904) 12 SLT 498.  As bank charges do not reflect true loss there is no reason to believe people must pay them.

Although, there has yet to be a ruling from a senior UK court on the legitimacy of bank charges a woman in England recently obtained a County Court decree against the Yorkshire Bank plc to refund £922 worth of bank charges (details of this case are on the website's resources section).  Govan Law Centre believes the banking industry wants to avoid a test case because the current position suits them and £3bn of lucrative profits is at stake.

Govan Law Centre's Principal Solicitor, Mike Dailly said: "When you go over your overdraft limit the banks punish you three times - a £30 letter, a £28 monthly charge and unauthorised rate interest at 30% APR or more.  High interest rates compensate the banks, but the other charges are really penalties designed to generate substantial profit.  The law says you cannot impose penalties for minor breaches of contract, but the banks still do it.  Govan Law Centre's site - - aims to give ordinary people the power to challenge their bank and demand a full refund".

The site contains style letters and statement of claim for a small claims action.  In Scotland a person can raise a small claims action up to the value of £200, and so long as they act in good faith and pursue the matter to a conclusion, no expenses can be awarded against them.  Bank customers therefore have a means to get their money back with little risk.  Govan Law Centre does not expect the banks to defend such actions, as it would cost them much more to do so than refunding peoples' money.

By teaming up with the English self-help site - - Govan Law Centre aims to offer citizens across the United Kingdom a means to seek a cash refund of unfair bank charges.


The new site is located at: