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Lloyds told to pay full costs
Justin Harper, Money Mail
9 May 2007

A bank is being forced to pay full costs to a customer who took it to court over unfair charges. It is believed to be one of the first times a small claims court judge has told a bank to refund not just the unfair charges, the cost of bringing the case to court, but all the associated costs in preparing the case. 

For the rest of this article go to This is Money web site
 
By law you can charge £9.25 an hour for the time you spend preparing your case. When a bank loses a case, it automatically has to pay the fixed costs involved with the case - this would be £80 if the claim was for a sum between £500 and £1,000 - a typical bank charge refund.

Gary Lloyd successfully took on Lloyds TSB on behalf of his mother Vivien who was charged £655 in charges by the bank. Gary, from Bristol, says: 'We sent all the standard letters to the bank, and it stalled us every step of the way.

Gary and Vivien Lloyd contacted the Consumer Action Group, which now has a template letter for people to use when claiming these costs. It has a database of all the hundreds of cases where banks failed to appear at court, proving they had no intention of defending the case but were simply stalling customers.

Marc Gander, co-founder of the action group, says: 'This is a massive victory and shows the way the courts are now treating these cases. It's not normal for them to award additional costs. Make sure if you are making a complaint you keep a detailed record of the time you spend preparing your case and the other costs involved.'

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The great bank revolt
 
The Sunday Times  25/2/07
 
Go to http://www.timesonline.co.uk  for the full article
 
Just two years ago Martin Lewis, the consumer campaigner and Sunday Times Money columnist, started his website www.moneysavingex-pert.com to promote his work. In January 2.5m unique users visited his site and 1m now subscribe to his newsletter.
It is this site that has turned the trickle of complaints started by Hone into something approaching a tsunami.
Last week Lewis described the rebellion as having reached "poll tax proportions". "The difference is that we are fighting this one, not on the streets, but from our armchairs," he said. "The internet has given people an enormous power and reach. It's not just my site, there are hundreds of them."
Lewis believes we live in an "adversarial consumer society" in which big business will take its customers for everything it can. The notion of "corporate responsibility put about by politicians is nonsense and works only to lull consumers into a false sense of security", he says.
Yet the relish with which consumers have returned to bank-bashing has still taken many by surprise.
The actions of one Declan Purcell, for instance, have become something of internet legend. After he lodged a successful court action against the Royal Bank of Scotland for £3,400 in illegal penalty charges, the bank was slow to pay. So Purcell used that tactic favoured by banks - and sent the bailiffs in.
Customers at the bank's Camden Town branch in north London watched in bemusement as the debt collectors earmarked four computers, a fax machine and a till filled with cash for removal.
"The bank was pretty shocked when the bailiffs went in," Purcell recalled. "But my view is that this is exactly what they would have done to me."
Another thing causing much glee on the net is the virtually identical "surrender" letters the banks have taken to sending out to complaints.
A letter from Barclays, dated September 26, 2006, is typical: "We consider that your claim lacks merit and it will fail . . . [But] to avoid the inevitable time and cost associated with pursuing the claim to trail, we are prepared to settle your claim. The offer to pay £4,263.99 is in full and final settlement."
Many hundreds of thousands of similar letters are expected to be delivered by the banks over the next 12 months.

HOW TO GET YOUR OWN BACK

Experts say that anyone who has ever received a penalty charge of more than a few pounds in the past six years should now be able to claim that money back. This is what you should do:
Check our Money section for a detailed 10-step plan to getting your money back.
Visit free websites such as www.moneysavingexpert.com and www.penaltycharges.co.uk to get pretested template letters for making your claim If after eight weeks you get no joy with your bank, file a complaint to the Financial Ombudsman Service at www.financial-ombudsman.org.uk Visit the Consumers' Association website www.which.co.uk . It, too, is campaigning on this issue and gives advice on pursuing action
Finally, be prepared to move banks before filing a complaint as some banks have been withdrawing overdraft facilities and shutting down accounts after repaying penalty fees
 
 

 
How 'insolvency lite' becomes a way out if the banks don't listen
 
From The Times
February 24, 2007
 
Go to http://www.timesonline.co.uk  for the full article
 
The high-street banks wrote off about £1.4 billion as a result of IVAs last year. They have been concerned that IVAs are irresponsibly marketed by insolvency companies, which down-play the drawbacks and wrongly claim that debtors can walk away from as much as 90 per cent of their debts. In fact, people taking out IVAs are rarely forgiven more than 70 per cent. IVAs are suitable only for people with very substantial debts, usually £30,000 or more.
The Office of Fair Trading last month censured 17 IVA firms for misleading advertising. The IVA industry and the banks are attempting to agree a code of practice.
IVAs are pacts between banks and borrowers in which the borrower agrees to a reduced schedule of repayments over five years. IVA firms typically charge £3,000 plus £900-1000 a year, taken out of the debt repayment, leaving the banks with sometimes only 10 or 20 pence in the pound. Some banks have become loath to agree IVAs.

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The Sunday Times April 02, 2006

Survival tips for the 'lost generation'
Young people face soaring house prices, student debts and little hope of a good pension. Kathryn Cooper offers some advice to ease the burden
 
 
YOUNG people are in danger of becoming a lost generation with soaring debts, meagre savings and little hope of a decent pension, according to a report published by the Financial Services Authority last week.
The City watchdog warned that people aged 18 to 40 face bigger financial problems than their parents did. They have a heavier debt burden due to soaring house prices, student loans and easier access to credit cards. And they can no longer rely on companies to provide a gold-plated pension in retirement.

 
The FSA has therefore launched a national programme to improve their financial knowhow. This will include better personal finance education in secondary schools, "money doctors" to help struggling university students, and financial packs for new and prospective parents.
John Tiner, FSA chief executive, said: "There is an urgent need to help the young. Rapidly changing economic and social trends mean that today's 18 to 40-year-olds are faced with greater challenges than their parents. They have greater access to credit and are becoming consumers at an earlier age. On top of that, the costs of higher education and retirement are increasingly being borne by individuals rather than the state or employers."
The regulator asked Bristol University to interview more than 5,000 people for its study: the responses expose an alarming generation gap.
More than 20% of people aged 18 to 30 always or mostly run out of money before their next pay packet, compared with only 14% of those between 31 and 50. About 13% of the 18 to 30s are constantly overdrawn, compared with only 8% of those between 31 to 50.
Young people also fared badly compared with older age groups when asked basic questions on percentages and the effect of inflation on savings.
This difference was not simply because younger people earn less. Tiner said: "The under 40s, and particularly those aged 18 to 30, are less financially capable, on average, than their elders even after taking account of factors such as their lower than average incomes and their relative inexperience in dealing with financial institutions."
We highlight 10 things young people should know when sorting out their finances.
If you delay starting your pension by just five years, the amount you need to save rises by nearly £700 a year
The FSA study found that while 81% of people below retirement age think that the state pension will not provide them with the standard of living they hope for, 37% have made no extra provision.
The earlier you take out a pension the better. If you started saving at 20, you would need to contribute £214 a month to a stakeholder pension to get an income of £20,000 at 65, according to Torquil Clark, an adviser. These figures assume that you receive basic-rate tax relief on your premiums, that they rise in line with earnings every year and that your investment grows by 7% a year.
If you delayed starting your pension until 25, however, the contribution required to get the same level of income would go up to £271 — an extra £57 a month or £684 a year. And if you waited until 30, the premium would be £348.
A pension is generally considered to be the best way to save for retirement because the government offers generous tax relief on contributions: it boosts every 78p contribution to £1 and higher-rate payers can claim a further 18p. So, in the example above, a £214 contribution would be boosted to £274.
Many young people are put off pensions, however, because they cannot access the cash until 50, rising to 55 from 2010. One alternative is to save into an Isa, which will allow you to get to the cash in an emergency, and then move the money into a pension at a later date.
Financial advisers generally recommend that young people take out a stakeholder pension because charges are capped at 1.5% for the first 10 years, and 1% thereafter. Bestinvest, an adviser, recommends the stakeholder plan from Scottish Widows because it offers several external funds as well as its own.
You should have at least three months' salary set aside for a rainy day
Young people scored particularly badly when asked if they had enough money set aside to cope with an unexpected drop in income or a major expense.
Philippa Gee of Torquil Clark said: "Ideally, you should have enough funds to carry you for six months in case of emergency, and this should be held in cash. However, this will be difficult for many young people and three months' salary is a good starting point."
It could take 30 years to clear credit-card debt if you pay off only the minimum
People aged 20 to 49 are the most likely to use a credit card for day-to-day spending on basic items such as food, and to fail to clear their balance at the end of the month, says the FSA.
If you cannot clear your balance, it is always worth paying off more than the minimum monthly repayment to reduce your debt as quickly as possible.
Suppose you had a credit-card debt of £2,100 on which you were paying interest of 15.9%. If you paid off only 2% a month — the typical minimum repayment — it would take 29 years and 10 months to clear your debt and you would pay a total of £3,161 in interest, according to Moneysupermarket, a financial website.

 
However, if you upped the monthly repayment to 5%, you would clear your debts in eight years and seven months and pay £675 interest. And it would take just four years and four months to clear your balance if you paid off 10% a month. These examples assume you don't add to the debt in the meantime.

 
You should also make sure you are on time with repayments. Robert Kenley of Moneysupermarket said: "If you fail to make your repayments on time, you will be stung with hefty fees — sometimes £25 a time — and the default will create a dent in your credit profile and affect the rates you are offered. Do it often enough and you may be refused credit."
Interest-free credit cards often have a sting in the tail: you could still pay about 15% on your spending
Advisers generally suggest that you switch all your credit card debts to a 0% deal and pay them off as quickly as possible. But there could be a hidden cost.
Kenley said: "Many cards charge 0% only on transferred balances; new purchases attract a higher rate. Your monthly payment is likely to go towards your transferred balance first, ensuring you pay a higher rate on purchases for longer."
However, some cards offer 0% on both transferred balances and purchases.
HSBC charges 0% for six months on both balances and purchases, after which the standard rate is 14.9%. There is no transfer fee.
Alternatively, Morgan Stanley also offers 0% on balances and purchases for six months, but the standard rate is 15.9% and there is a 2% transfer fee.
You could save £140 a year on your overdraft if you shop around
It is essential that young people get the best overdraft because more than half go overdrawn at some point, according to the FSA, and one in eight are constantly overdrawn.
Alliance & Leicester's Premier Direct account charges 0% on overdrafts of up to £2,500 for 12 months, after which the rate is only 5.9% compared with up to 20% at some banks — a saving of £140 a year on an overdraft of £1,000.
A&L's unauthorised overdraft rate is also 5.9%, compared with as much as 30% at other high-street banks.
Alternatively, Nationwide's Flexaccount has an authorised rate of 7.75% when you go overdrawn and 24.9% if you go into the red without permission.
You don't necessarily need buildings insurance
The FSA study found many young people take out unsuitable products. For example, more than 10% of tenants have buildings insurance even though this is normally the responsibility of the landlords.
Vanessa Wood of the FSA said: "Don't buy buildings insurance if you rent your accommodation without first checking whether you really need to."
You don't necessarily need life insurance
The City watchdog was also concerned by the number of single people, many of them young, who have taken out life insurance even though they have no dependants.
The FSA said: "We would argue that those without dependants do not need life insurance. However, 7% of the population say they are single and nobody else lives in their household, yet they still have a life policy."
However, some advisers argue that you are better off taking out life insurance when you are young because your premiums will be lower.
Car insurance is not necessarily extortionate
Fewer than half of drivers have switched their car insurance in the past five years, according to the FSA. Many young people are put off because they think all motor insurance is costly for the under-25s, but that is not necessarily the case.
Annual premiums for a 25-year-old man driving a Ford Fiesta and living in Crawley, West Sussex vary by almost £600, according to Insuresupermarket, a comparison website. They range from £912 with First Alternative to just £357 with Swiftcover.
You can cut premiums by building up a no-claims discount. If the same 25-year-old had five years without claims, he could get a Direct Line policy for just £201.60 a year.
Your employer often offers the best financial deals
If your company offers an occupational pension scheme, snap it up because your employer could double your contributions. The typical employer pays in 4% to 7% of salary on top of 3% to 4% from workers.
Gee said: "You would not believe the number of people I see who forget to fill in an application form for their occupational pension plan and miss out on a year's contributions."
Many employers also offer benefits such as three or six months' full pay if you are off work due to sickness or an accident, which will reduce the amount of insurance that you need to take out yourself.
It may be worth taking out a student loan even if you don't need the money
Students can currently borrow up to £6,170 a year in London and £4,405 elsewhere towards their living costs. Interest is charged at 3.2%, about half the rate on commercial loans.
You could earn nearly 5% a year, though, by investing your maximum loan over three years in a savings account — a profit of £240 even after the interest.
Gee said: "While there are some who are canny enough to do this, others would be tempted to spend their loan and would end up losing money."
 
 
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The Sunday Times April 16, 2006

Escape the debt trap
In the second of her series of tips for young people, Kathryn Cooper warns about the risks of easy credit
 
 
THE number of people under 25 seeking help with their debt problems has doubled since 2003 — a bigger increase than for any other age group, according to the Consumer Credit Counselling Service (CCCS), a charity.
Young people are easy prey for credit and store-card firms. The average twentysomething owes £15,000, and sees debt as a way of life.

 
Malcolm Hurlston of the CCCS said: "Credit cards have blurred the distinction between borrowing and spending and, for many young people, student loans have made borrowing normal."
Debt-counselling service Debt Free Direct says people in their twenties are being offered credit of up to £8,400 by some card companies — more than two-thirds of the average salary.
Robert Kenley at Moneysupermarket.com, a comparison service, said: "Young people are a key target for banks and finance companies, so you need to be more savvy when applying for cards. It is very easy to get credit in stores or by responding to direct mail, but you will not get the best value for money that way."
The Office of Fair Trading this month ruled that penalty charges on late payments and exceeding credit limits were "unfair" and should be set at £12 or less, compared with the going rate of £25 to £30.
However, there are still plenty of traps for the unwary.

Avoid store cards
Many store cards aimed at young spenders, including Oasis, Miss Selfridge and Topshop, have exorbitant interest rates of about 28%, so avoid them at all costs.
However, that can be easier said than done because shops often offer a 10% discount on your first purchase. If you can't resist, pay off the balance in full when the bill comes and then cut up the card.

Throw away letters offering higher credit limits
If a mailshot drops through your letter box offering to raise your existing credit limit, or a new card with a higher limit, throw it in the bin unless you are absolutely sure you will clear the higher balance.

 
Don't stick with your student account card
Many students have credit cards through their current account provider, but they can be uncompetitive. HSBC's Student Service card has a standard rate of 18.9%, for example, compared with 6.9% on the Capital One No Hassle card.

 
Pay more than the minimum if you cannot clear the balance in full
If you can't clear your debt in full, pay off more than the minimum monthly repayment to make sure your debt reduces as quickly as possible.
Suppose you had a credit-card debt of £2,100 on which you were paying interest of 15.9%. If you paid off only 2% a month — the typical minimum repayment — it would take 29 years and 10 months to clear your debt and you would pay a total of £3,161 interest, according to Moneysupermarket.
But if you upped the monthly repayment to 5%, you would clear your debt in eight years and seven months, and pay only £675 interest.

The Telegraph
Banks may face clampdown on account charges
By Emma Simon (Filed: 19/09/2005)
The Office of Fair Trading warns lenders over 'excessive' penalties for breaching overdraft limits
 
Banks face a crackdown on penalty charges that are routinely imposed on customers whose current accounts slip into the red.
The Office of Fair Trading has confirmed to The Sunday Telegraph that it expects the banks to apply the findings of its investigation into unfair credit card charges to other bank products.
In July the OFT found that penalty charges of between £20 and £25 imposed on credit card customers who pay bills late or exceed credit limits were "unfair" and "excessive". It said last week: "Banks will be expected to apply these principles to other 'default' charges levied on similar products." It confirmed that this would include bank accounts.
Current account customers face myriad charges on un-authorised borrowing. Most banks charge a monthly fee of between £20 and £30 if customers exceed their agreed overdraft limit. Customers also face an "unpaid fee" of about £35 each time there are insufficient funds to cover a debit payment or standing order. This is charged on every unpaid item.
Additionally, some banks charge a £25 "paid referral fee" for honouring a payment instruction which pushes a customer's account beyond the authorised overdraft limit.
There is sometimes a similar charge for each cheque that is bounced and some banks also levy an additional fee for writing to customers to inform them that their borrowing limits have been breached.
The regulator is understood to be concerned that the penalties imposed by banks far exceed the costs incurred to them each time a customer transgresses.
A report due to be published tomorrow by Defaqto, a financial analyst, will confirm that current account providers should expect the OFT to clamp down on these charges.
The report will say: "There is clearly an administrative and time cost to the [bank] in dealing with delinquent usage of a current account. One would expect a fair charge for this cost to be passed on to the account holder. However, in the age of automated mail it is difficult to see how the automatic production of a letter or the non-payment of a standing order can possibly justify a charge in the region of £25 to £39 per occasion."
In July the OFT wrote to eight unnamed credit card providers regarding "excessive" charges. The companies concerned have until the end of this month to respond. The regulator has warned that failure to act may result in banks facing legal action to enforce cuts in charges.
 

Sunday March 30, 2003
The Observer
It is Mother's Day but it isn't what it used to be. In thousands of homes, celebrations will reflect the changing shape of British families. Children will take breakfast to their mothers and telephone stepmothers. Parents who live apart may reunite for the day, while children from other households will scatter to visit mothers and siblings elsewhere.
The latest census for England and Wales, collated in 2001, confirmed that families are shifting away from the married model that dominated most of the 20th century. In 2001, the number of divorces granted n the UK increased by 1.4 per cent, from 155,000 in 2000 to 157,000. More of us are living in stepfamilies or with lone parents. Single parents accounted for 10 per cent of households in the census and nine out of 10 lone parents are women. Nearly half of these and nearly two thirds of male lone parents are in work.
Today we summarise the key issues for families in flux - from when they first have to reorganise their finances at divorce or separation through to keeping the mortgage covered on a limited income.
Divorce settlements
Divorce lawyer Marilyn Stowe says that some partners have unrealistic expectations about what they will receive in the settlement. She says: 'The courts distinguish between different marriages depending on their duration and the financial contribution each partner has made - you won't get half of everything if you have only been married for three years.'
When deciding on splitting the assets, the courts use set criteria including the children's welfare, and the income and earning capacity of each spouse.
Dividing the assets
Lawyers say under the settlement of a typical case involving a married couple with two children owning a semi-detached house, the main breadwinner - often the father - can expect to lose the marital home and the capital locked up in their house if they are not to be the main carer for the children.
These breadwinners can expect to keep their income, minus deductions taken directly out of their pay by the Child Support Agency (CSA) for child maintenance costs.
Splitting the breadwinner's pension can also form part of the settlement, but there are concerns that not all ex-wives are getting the full benefit of pension-sharing rules. This is a modern alternative to 'earmarking' where part of the pension pot is set aside for the ex-wife.
David Scott, of Alan Steel Asset Management an independent financial adviser (IFA), says: 'The disadvantage with earmarking is that spouses have to wait until their ex takes their benefits before they can. Under pension sharing the other person can decide when to retire independently.'
The other option, offsetting, sees assets such as the home offset against the value of the pension fund.
Child care costs
The CSA calculates deductions from a parent's net salary after tax and any pension contributions based on the number of children they are supporting. For one child it is 15 per cent of salary, 20 per cent for two children and 25 per cent for three children. Lone working parents can qualify for working tax credits, which include a separate benefit to help towards the cost of registered childcare. Call the Inland Revenue hotline on 0845 300 3900 to find out if you are eligible.
Life insurance
While getting insurance might not feel like a priority when you are worried about more immediate needs, think about how your children would fare if you were to die. Both the parent providing child support payments, plus the main carer, should get life cover to ensure that, if they should die, the children will still be provided for.
Life insurance premiums have fallen dramatically over the last three years and term assurance - which pays a lump sum if you die within a certain period - can be bought at an even lower premium. Remember to shop around.
Money talk
The financial and emotional adjustment period for families after divorce can be a testing time.
While Stowe's firm Grahame Stowe Bateson runs workshops to help families readjust, there is a gap in the provision of this sort of aftercare. Stowe says: 'Those who did not take the decision to end the marriage can feel victimised, making them much less likely to cope with the task of rebuilding their lives and their finances.
Often both parties are to blame for the breakdown of the marriage - accept this and concentrate on moving on.
'With your partner's new partner, accept that it takes time to build a decent relationship.'
Even if the relationship is amicable between exes, it is important to get all the financial aspects of the separation in writing.
Stay out of debt
The Consumer Credit Counselling Service says many newly separated par ents are tempted to over-spend on credit cards.This can be because parents want to show their children their finances have not been dented by the split, or to compensate for the family breakdown.
Donna Bradshaw of IFA Fiona Price and Partners says it is important to manage your child's expectations: 'Try to get your children used to the new reality. It's better to be well-fed than it is to have the latest gadgets and trainers.'
If you need to use credit cards, take advantage of zero per cent cards while you can.
Wills
'One of the first things you should do when you split up is look at writing or re-writing your will,' says Bradshaw.
This can stop nightmares like your former spouse receiving the share designated to them when you were married while your new partner and offspring get nothing from your estate. Wills become void on marriage so if you remarry you will be dying intestate.
It need not be expensive. You can buy the forms from high street stationers, or organise your will cheaply online through companies such as Compact Law. www.compactlaw.co.uk
---

Two roofs, one income
Lenders can be helpful if they are given notice, writes Helen Monks
Sunday March 30, 2003
The Observer
If one mortgage is a burden, two must seem an impossible load. Parents in modern families may have to finance loans for new and existing families or pay for one single-handed.
Frances Walker of the Consumer Credit Counselling Service says: 'There is a growing trend for single parents, or one parent supporting the family they no longer live with, plus a new family home or rented accommodation for themselves.'
Mortgage borrowers must be more than three months in arrears before they can apply for state help with their interest repayments.
Ian Jordan, head of mortgages at independent financial adviser Hargreaves Lansdown, says: 'Tell your lender as soon as you think you might be facing difficulties. Most borrowers will be surprised just how helpful their lender can be if they let the company know early.'
One divorcee told Cash: 'I was paying two mortgages for a few months - for my ex-wife, and for the new house for myself, my new partner and my children. This was obviously a huge strain, but I asked my lender if I could not pay interest on the loans for a few months to bring down the cost of my repayments and roll-up the interest to pay over the rest of the mortgages. They agreed without quibbling.'
A typical settlement sees the mother looking after the children in the marital home, but divorce lawyer Marilyn Stowe of Grahame Stowe Bateson says it is possible for the father to continue to own the house.
Let us say a husband has paid most of the mortgage and wants to keep ownership, while still providing a roof for his former partner and their children.
As part of the settlement he could opt to retain ownership of the property, but allow his ex-wife and their children to live under a legal agreement to stay in the home .
Those starting up a new home with a new spouse and family would also do well to bear in mind that, statistically, second marriages are even more likely to fail than first marriages. Establishing a pre-nuptial agreement ahead of getting married could save further financial chaos should the relationship break down.
Lenders are sympathetic to borrowers whose ability to repay their mortgage depends largely on maintenance payments from their ex-spouses, but normally only if the maintenance has been settled in court.
For fathers whose income must support either their own rented accommodation or a further marital home, as well as providing a home for their ex-wife and children, Harris suggests fixed or capped deals for the security of knowing what the maximum repayments will be.
· Consumer Credit Counselling Service, 0800 138 1111.
 

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The Guardian July 2005
A law student has won a groundbreaking victory over the penalty charges levied by banks when customers go overdrawn or are late with payments.

Stephen Hone, 29, from Plymouth, took Abbey to court claiming that the bank's £32 penalty charge for bouncing a direct debit was unfair, as it was disproportionate to the costs incurred by the bank.

Mr Hone, a father of three, is now expected to be awarded hundreds of pounds in compensation. In his claim entered at Plymouth County Court in Devon, Mr Hone said he had been charged a total of £2,000 over six years.

He wrote: "Your charges do not reflect any actual or real loss, instead they appear to represent a lucrative profit-making scheme."

He added that the £32 charge was simply a "moneyspinner" for the bank, whose only cost was in generating an automatic letter.

Abbey failed to file a defence because it says it was not notified of the court date. So the district judge, Andrew Moon, had no option but to find in Mr Hone's favour. He made a court order requiring Abbey to pay Mr Hone compensation plus costs, with the exact figure to be decided at a later date.

So, does this ruling mean that customers of banks no longer have to pay these punitive penalties? The picture is, at best, fuzzy.

Abbey immediately issued a statement saying: "This ruling does not set a precedent. We are applying to the court to have the judgment set aside. The charges we impose are legitimate and proportionate to the administrative costs incurred by the bank for situations such as direct debits."

Jobs & Money was the first paper to highlight the potential illegality of penalty charges imposed by the banks. Richard Colbey, a barrister who writes regularly for Jobs & Money, told readers in August last year that late payment penalties may be legally unenforceable. He said: "Such charges are unlikely to be enforced by the courts: penalty clauses are legally void unless they reflect the loss the party enforcing them has suffered."

A lively correspondence followed in the letters pages of Jobs & Money, with stories of banks that backed down, and others that resisted.

So what does Mr Colbey say now? Here is his latest opinion:

"Claims against the Yorkshire Bank and the Alliance & Leicester have resulted in complete capitulation by the banks, while the NatWest and Lloyds TSB have been more robust in defending their position.

The gist of what we said was that, as the charges are intended to penalise customers who overdraw in breach of contract, they are penalty clauses. Such clauses, under a century-old doctrine, are void even if written into a contract.

"This argument was validated by, perhaps somewhat naive, bank press officers stating the charges are designed as a way to deter or penalise unauthorised borrowing.

"The penalty clause argument, however, depends on the customer breaching the contract. Some banks frame charging clauses so that an 'unauthorised' overdraft may be permitted by the bank at a specified price. As the customer has effectively requested the facility and the bank agreed to it, there is no breach and hence no penalty charge.

"There would, however, potentially be a penalty clause if the bank had to pay the money which led to the unauthorised borrowing, for instance because a cheque guarantee card had been used or if the bank refused the payment.

"Mr Hone argued his case both on the basis of penalty clauses and the Unfair Terms in Consumer Contracts Regulations. These Regulations apply where a consumer, who fails to fulfil an obligation, is required to pay disproportionately high compensation.

"The £2,000 Mr Hone had to pay over six years seems disproportionate to the standard letters the Abbey had sent, and as the charges were mainly for refusing direct debits he was in breach. It may be that the courts will interpret the Regulations more widely than the penalty clause doctrine.

"Although it is always easier to win a case when the other side is not there, the judge still considered the merits of both sides' cases before deciding for Mr Hone. He even adjourned the hearing to give the Abbey an opportunity to be heard on how much it has to repay.

"Customers who want to reclaim such sums through a small claim in the county court should rely on both the Regulations and the penalty clause argument.

"Sometimes, though, the most effective way to counter disputed charges is to refuse to pay them. While banks may feel honour bound to defend legal proceedings brought against them, they rarely sue for disputed sums.

"Customers can close accounts leaving the charges outstanding and tell the bank's legal department it will be sued for libel if it reports them to credit reference agencies. That should be enough to have the charges written off as 'a goodwill gesture'."