What is the law?

When you exceed your overdraft limit or a cheque bounces you are technically in breach of contract because you signed the conditions saying that you would stay within the authorized limit. However, the legal remedy is for the bank to only claim whatever actual losses it has suffered due to your actions. This is enshrined in cases as old as Robinson v Harman [1848] 1 Exch 850

For example, the bank might be able to argue that you should pay additional interest on the additional borrowing or even a very small sum for the cost of the automated letter and stamp. It is commonly thought that these costs are a maximum of £2.50 and the banks are reluctant to prove otherwise.

This means that the charges of £20, £30 or £40 are penalties or fines (not losses) and are simply unfair terms and not lawful due to the provisions of the Unfair Contract Terms Act 1977.

Didn’t I sign the terms and conditions with the bank saying they can charge me?

Yes, you probably did, but fortunately it is trial by judge not trial by bank! If the charges are penalties and not direct losses then the Court would probably find that they are unfair contract terms, which the Judge would simply disallow.

Didn't the banks win some recent cases?

Whilst the banks love to publicize those decisions they have been openly criticized for misleading their customers. Those decisions are not binding on any other Court and were based on technicalities. This is why the banks still want to keep the cases out of court.

Good news - the law is on your side. Bad news, the banks are unlikely to simply pay back billions of pounds without being forced to.

We are specialists in these types of claims and know exactly how to win your case and want to help you.