unfair UK bank charges

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step 1 - send letter to your bank

step 2 - raise a court action:

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How do banks calculate bank charges?

UK banks have been reluctant to disclose the costings of how bank charges are set for reasons of 'commercial confidentiality'. 

However, when pressed by the House of Commons Treasury Select Committee, they have revealed that charges are designed to off-set all of their debt recovery costs.   That would include irrecoverable enforcement costs for people who default on loans (consumer and commercial) and debt write off from bad debts, bankruptcy and liquidation.  

So, bank charges do not relect the actual cost the bank incurs in handling your account.  Below is an extract from the House of Commons Treasury Select Committee's 2nd Report (2005) available online here:


50. Mr Varley claimed that in Barclays' case "the charge was insufficient to cover the administrative costs".[89] In a letter Barclays expanded on the costs arising from a late payment: these included additional operating expenditure (relating to: writing letters and making phone calls, the dedicated collections department which deals with accounts which have been in breach for over 30 days, developing repayment plans and monitoring accounts), increased credit risk and capital costs.[90] Sir Fred Goodwin told us that for RBS "The costs are going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments. The way these charges are arrived at is by taking these total costs and making some assumptions about the volume that is going to come through to arrive at the individual charges".[91] We noted in our previous report that the average charge had increased by over 50% from £12 in 1998 to nearly £19 in 2003. It could be considered strange that the industry's costs have risen so dramatically, when data from APACS indicate that provisions for bad debts have remained constant.[92] Also, continued advances in IT should have reduced costs by automating processes. Of course it may be that the industry could argue that the average fee did not cover the costs involved adequately in 1998.


51. Credit card issuers continue to maintain that their penalty charges represent a fair recovery of the costs involved, but it is impossible to know—because companies have been unwilling to place in the public domain the information needed to create confidence that these charges are reasonable. We therefore strongly welcome the investigation by the OFT and await the result with interest. We trust that, irrespective of its eventual conclusions about the charges, the OFT's report will contain sufficient detail on the way charges are levied to allow judgements to be made as to whether fees are being used to extract additional revenue from cardholders (including those in financial difficulty) rather than covering reasonable costs. It is in the interest of companies themselves for such information to be publicly available, so that their customers can see that the charges are reasonable.


example of bank charge letter

example of bank charge letter

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