Why Bank Charges are Unlawful

Contract law in England and Scotland states that any penalty imposed by a breach of contract should not exceed the cost of that breach. In the case of banks this means that, if you go over your overdraft limit or a cheque bounces or you are unable to make a payment, then any bank charge imposed should be roughly equal to what it costs the bank when this happens.

Now typically when this happens banks charge anywhere up to £35 for these breaches in contract but this is estimated to be way over what it actually costs them! BBC2 recently had a group of senior bank staff estimate the real costs and their projections came out at between £2.50 and £4.50.

All things considered this makes bank charges unfair and therefore unlawful. The banks do not have the right to charge this money and the worst thing is that they take it out of your account without your permission. Can you imagine if any other company did this, you would go through the roof but we seem to accept that it’s OK for banks to behave this way.

This same law and set of circumstances applies to credit cards too, by following the same steps laid out for bank charges you can reclaim any unfair charges on your credit cards too!

Posted in: Legal

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