Case 1 - Personal Account Holder

Customer with £7500 overdraft facility with local bank was invited to transfer his account and increase the overdraft limit to £10,000 by another bank.

The rate agreed between the new bank and the customer was 5.0% over Base Rate. During a period when the customer fell on hard times and was struggling to keep up repayments, the bank called in their solicitors to recover a sum of money that they had now compounded as totalling £17,000. The customer was unhappy with the sum and challenged the bank but was unable to get a breakdown of the additional interest charges. He decided to commission an independent audit by BANKCheck on the account.

The audit revealed that over a 2 ½ year period overdrawn balances on his account were being charged at 24% over base rate resulting in an interest overcharge of £3,500.

The results were presented to the bank, which in turn conducted its own investigations.

The reason for the overcharge was a failure by the bank to impose limits on the account thus the account was automatically charged default rates (Base + 12% + 12%) as opposed to the agreed rates (Base + 5%) on all overdrawn balances.

The bank admitted an error had been made and the case was finally settled at a payment to the bank of £10,000, a reduction of £7,000 on the initial claim.
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