THOUSANDS of bank customers with overdrafts can claim back unfair charges if they have pushed them into further debt.

Overdrafts are a very expensive form of borrowing, with most banks charging 39% interest on most accounts.

But in an emergency, you may find yourself with no other option.

Lenders currently charge between £2 to £30 a month for an arranged overdraft.

Bank used to charge unarranged fees at a much higher rate between £6 a day or £80 a month, which could have added up to hundreds of pounds.

But in April 2020, new regulations banning these high unarranged fees come into force, which cut the cost of borrowing £100 from around £6 a day to less than 20p a day.

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But if you've already been hit by these excessive charges and been pushed further into debt as a result, you may be able to get a refund from your bank.

We spoke to Sara Williams debt expert and founder of Debt Camel to find out precisely what customers in these circumstances can do.

Ms Williams said: "You may be able to win an affordability complaint against your bank and get a refund of the interest and charges you have paid if you're unable to get out of your overdraft."

How do I know if I've been unfairly charged?

There are three different reasons that overdraft fees could be deemed "unfair". These are:

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1. The bank charges have caused you financial hardship

Lenders have a responsibility to treat you fairly if you're struggling financially to stop you from being pushed further into debt.

So if you're in financial hardship, it should be doing all it can to help you get back on your feet rather than making the situation worse.

According to the FCA, you're considered to be in financial hardship if:

• You're failing to pay the minimum repayments on borrowed cash
• You have damaging marks on your credit file
• Most of your income is going towards paying off the debt and you may have had to take out a loan to help pay for them
• You've taken out a Debt Management Plan (DMP) or other debt solution such as an Independent Voluntary Agreement (IVA)
• You've been talking to a firm, such as a charity, about taking out a debt management plan or how to get help.

You'll also need to be able to back up each point with proof, such as letters and statements.

2. You asked for help from your bank but they didn't offer you anything

If you were struggling to keep up with repayments and asked your bank for help and it didn't offer you anything, then any subsequent charges may be unfair.

Reasons for not keeping up with the repayments include mental health problems, losing your job or taking maternity leave.

The bank should have realised that you're in a vulnerable position and offered help.

You will need to provide proof that you spoke to your bank, what you told them and that they didn't help you.

3. Your bank increased your limit to an unaffordable level

You may also be able to argue that you were unfairly lent to if your bank upped your overdraft without you asking it to and you ended up with charges that you can't keep up with.

Again, you'll need proof of this happening.

How much can I claim back?

There is no set limit for the unfair overdraft fees you can claim back.

As long as you prove that you were in financial hardship when you were charged them you'll get some money back.

Ms Williams said: "The main compensation you get is a refund of the interest and charges you paid during the period the bank should have realised the overdraft was unaffordable.

"So you still repay what you borrowed, but without any interest."

Typically, these charges range from between £2 to £30 a month for an arranged overdraft.

And as there's no set limit for what you can claim, these fees can easily add up to hundreds of pounds.

Figures from the FCA suggest that only 1.5% of customers are hit with these charges, but the majority end up forking out about £450 a year on them.

How do I reclaim the charges?

Firstly, you'll need to work out how much you've been charged in overdraft fees when you felt they were unaffordable.

You need to make sure that you have all of the paperwork to back up what you're saying, including bank statements.

If you no longer have the statements, you can look for them on online banking.

You'll then need to complain to your bank.

Ms Williams said: "It’s best to send a complaint in writing."

Debt Camel supplies a straightforward template letter you can use to help.

And remember if your account is a joint account, make it clear that you are both complaining.

Your bank must reply within eight weeks of receiving your complaint.

They may offer you a refund you are very happy to accept, or only refund the last year, say, even though your overdraft has caused you a lot of problems for a long while.

But Ms Williams said that even "very good complaints" get rejected.

If this happens and you don't get the response you were hoping for after eight weeks – take your complaint to the Financial Ombudsman.

Ms Williams said "This is easy – the Ombudsman has a simple online form you can use.

"But you must do this within six months of getting the decision from the bank, so don’t delay."

How likely are you to win?

In the past, most of these complaints had to go to the Ombudsman as the banks just rejected them all.

But Ms Williams said she is seeing more cases getting reasonable offers directly from banks.

She said: "Most banks will refuse to refund back further than six years, even though the Ombudsman has the discretion to go back further if you have only just found out about these complaints.

"Many people are happy with a refund of six years of charges.

"But banks do still reject very good complaints. So don’t be fobbed off."

How to get free debt help

If you're in debt there are plenty of services you can take advantage of and they offer free and friendly advice on how to manage debt.

Most of them can offer you free guidance and help in person, over the telephone or online.

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• Money Helper – 0800 138 7777
• Citizens Advice – 0808 800 9060
• StepChange – 0800 138 1111
• National Debtline – 0808 808 4000

They can also help you take the next steps if you need a debt management plan (DMP) to tackle your debt or an Individual Voluntary Arrangement (IVA). These are agreements for managing multiple debts.

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