Compensation can come at a price

Though it's been good to see the bad, old banks getting their comeuppance over extortionate charges during the past few weeks, it's been sad to witness just how quickly the claims farming industry has managed to mobilise itself - ever-enthusiastic at the thought of another financial services "scandal".

Only a few weeks ago, the very same companies who are now offering to help you claim back "illegal" bank charges were spending their time pursuing endowment mortgage mis-selling claims. A few quick changes to their websites, however, and they're all set up to get consumers outraged about being ripped off by the banks - and, as ever, they'll be taking a very healthy cut for their services.

While these ambulance chasers justify their enormous fees (often as high as 40 per cent) by claiming that their customers would otherwise have never realised that they were due compensation, this is a hard claim to substantiate.

With the bank charges scandal regularly in the newspapers and on TV, those who have the inclination to make a claim are more than likely to hear about the issue sooner or later. And if they go through the relatively simple process of making a claim themselves - by using one of the free template letters available on Which?'s website, www.which.co.uk - they will get to keep every penny of any refund they win, rather than having to sign away up to 40 per cent of it to a claims farmer.

But high fees are not the only reason I really dislike the ambulance chasers. Worse still is the fact that it is in their interests to keep each scandal running for as long as possible.

While I have a lot of sympathy with people who were genuinely mis-sold an endowment mortgage, or were ripped off by bank charges, the claims farmers know that hindsight is a powerful tool when it comes to these kind of scandals. With a little bit of encouragement, it becomes all too easy to talk someone into believing they were mis-sold an endowment - especially when you explain how much compensation they might win.

In the case of bank charges, I have to admit that I've found myself feeling a little sorry for the banks. If you busted your agreed overdraft limit because you didn't keep a close enough eye on your finances, and then got charged £25 as a penalty, that's a fair cop in my book. If you then got charged three more £25 fines because a series of direct debits came out on the same day, then I think you have every right to complain. That's unreasonable.

I'm glad that the Office of Fair Trading has put pressure on the banks to reduce their charges to £12 a pop, but I think it's a bit rich for people to reclaim half of a charge that they were landed with five years ago because it's now been declared "illegal". I knew full well that I would get charged £25 every time I bust my overdraft limit. I did think it was a lot of money, especially as a student, but when I got caught out, I'd take the fine on the chin. After all, my bank has been providing me with a free current account for the past 20 years, so it's only fair to allow them to make money somewhere.

I know I'm not the first to say it, but the downward pressure on charges will ultimately only end up penalising those of us who manage our finances well enough to avoid getting penalised too often. If banks can't fine customers for stepping outside their agreed terms and conditions (presuming they've made them clear enough), then they'll simply be forced to charge everyone just for the use of basic current account services.

Don't get me wrong, some were unfairly charged thousands of pounds in fees, and I hope the current momentum helps them reclaim every penny. But I also hope the ambulance chasers have the dignity to stop short of pushing through claims where customers were treated reasonably. The sooner the financial services industry is free of the talk of "rip-offs" and "mis-selling", the better.

j.daley@independent.co.uk