Overdraft fee reclaimed cost UK bank giants £400m

Customers reclaiming “unfair” overdraft fee and interest charges cost the UK’s biggest banks nearly £400m (€595m) in the first six months of the year alone, it was revealed today.

NatWest parent Royal Bank of Scotland was the latest banking giant to disclose its liability for so-called “goodwill” current account administration charges as it unveiled half-year results showing it forked out £81m (€120m) in refunds in the six months to June 30.

RBS’s figure takes the total paid out by the country’s “big five” banks to £399m (€593) – double that originally estimated by analysts.

Rival Barclays revealed an £87m (€129m) liability yesterday, while Halifax Bank of Scotland has reported a figure of £79 million, HSBC posted £116m (€172m) and Lloyds TSB disclosed £36m (€53.5m).

The multi-million pound bill faced by the banks comes after tens of thousands of consumers have complained about the charges, which are levied on those who breach authorised overdraft limits, with many taking their bank to court.

The fees are now the subject of a legal action by the Office of Fair Trading (OFT) against eight UK banks.

There is a stay of all claims that are pending until after the outcome of the test case, but banks are meanwhile able to continue charging administration fees.

Martin Lewis, campaigner and founder of MoneySavingExpert.com, said: “It’s an indication of just how big bank charge reclaiming has been and how much banks have been – I think – unfairly raking in.”

MoneySavingExpert.com has been providing template letters for bank customers to use in reclaiming charges since last November and said as many as 1.3 million people have so far downloaded 4.1 million templates.

Mr Lewis estimates that each claimant has received between £1,000 (€1,500) and £1,500 (€2,200) on average in refunds.

He added: “This is the biggest mainstream consumer revolution since the council tax riots, but the only difference is that this is being done from the armchair.”

The millions handed out by banks in penalty refunds is reportedly only a fraction of the money they receive by charging these administration fees, said to be around £4.7bn (€7bn) a year.

The liability is also offset by mammoth profits banked by the sector.

The five biggest banks this week reported a total pre-tax profits haul of more than £20bn (€29.5bn) since the start of 2007.