Banks, credit card companies, lenders and other financial institutions in the UK make an estimated £4.5 Billion (GBP) -profit- from illegal, punitive charges levied on the British public. British Common Law and the Unfair Terms in Consumer Contracts Regulations make it illegal for any company to profit from charges for breach of contract, such charges include (but are not limited to) failed direct debit letters, going over your overdraft limit, missing a payment on a loan or credit card to name just a few. The law requires that charges of this nature MUST accurately represent the cost of dealing with the breach to the institution issuing them. Many banks and other financial institutions charge upto £35 (GBP) for each letter sent, the Information Commissioners Office estimates that actual costs of these automated letters come to no more than £5.00 GBP each and a recent investigation by the BBC's Whistleblower program recently showed that in actual fact these charges only equate to a £2.00 cost to the institutions involved.
The banks have already paid back over £10 million (GBP) in the past 18 months, but the process of being reimbursed for these illegal charges is both long and stressful and requires individuals to file a claim in the County Court. The usual way these claims progress is as follows:
1. Customer sends a Subject Access Request (under the Data Protection Act) to request copies of all bank statements for the previous 6 years (6 years is the limit for such cases). Under the law companies are required to respond to a SAR within 40 working days and they are permitted to charge a maximum of £10.00 (GBP) for the cost of providing this data. Companies will generally try and delay sending this data for as long as possible and in many cases have even refused to provide such data, which is a blatant breach of the law and requires the customer to file a separate civil action in county court for damages and/or send a complaint to the Information Commissioner. Many companies have tried to get out of sending this data by storing it on microfiche and arguing that microfiche is not a relevant filing system under the Data Protection Act. However, the Information Commissioner ruled late last year that Microfiche is indeed a relevant filing system in this situation (google for Information Commissioner rules against Abbey microfiche claims).
2. Customer sends a Letter Before Action (LBA) to the company they wish to claim their charges back from, giving them an opportunity to repay the charges before legal action commences. It is incredibly rare for any of the companies making these charges to pay up at this point, and most companies send a letter back saying the charges are lawful as the customer signed a contract permitting them. This is simply not true, as the Unfair Terms in Consumer Contracts Regulations make the act of profiting from charges illegal in British law.
3. If the company fails to meet the demands of the customer to pay back the illegal charges, the customer must then file a claim in the County Court (normally Small Claims). This costs the customer money which is why the companies responsible tend to ignore the LBAs. Since most of the people who receive illegal charges are poor, the companies know that many people will not be able to afford to pay the filing fees and therefore many customers will drop their claims at this point. The companies -rely- on this fact and are playing a numbers game. Furthermore, court procedures are laborious and stressful, not to mention a minefield for anyone not legally qualified. A simple error on one of the forms is enough for the court to dismiss the case or refuse to hear the case at all. Again, the companies issuing these illegal charges, rely on this fact, as they know most of the customers making claims will be "Litigant in Person" (not using a lawyer or solicitor) because of the costs, and also many people from the poorest sectors of our society are not educated in matters of law and are likely to make mistakes in filing the paperwork. Again, it is a numbers game.
Ultimately, the companies tend to settle within days (or even minutes) of the case going before the court, as if the case was to be processed, they would be required during the discovery stage to provide evidence of their costs. None of the companies want to be forced to do this, as since they are making a profit from these charges, they would be providing evidence which shows that they are indeed breaking the law, therefore they would lose the case, a precedent would be set and the floodgates would open.
They don't mind paying back £10 million a year because they are making an estimated £4.5 Billion in profits so having to give £10 Million back is a drop in the ocean for them, however, if they were forced to pay back all their illegal charges, they would not be happy and neither would their shareholders.
But the fact remains that these charges are illegal. No-one is saying that they should not be permitted to recuperate their costs through charges, but the law states they must not make a profit on these charges, and it has to stop. This is why I have started a petition on the Prime Ministers Petition website, to try and get the government to act by forcing all financial institutions to pay back all illegal charges with interest for the past 6 years as permitted by the law, automatically. This would avoid poor people being denied justice because they cannot afford to file claims in the County Court and would also include all people who have been illegally charged in the reimbursement. Many people are not even aware that they have the right to claim these charges back.
You can find my petition on http://petitions.pm.gov.uk/Illegal-Charges/ and I urge all people who read this who are from the UK to sign the petition and to tell everyone else they know in the UK to do the same.
You can find more information on this issue at the following websites:
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