First Direct £25 overdraft fee

I too have received a letter from first direct this morning telling me they were going to charge me a £25 fee for my £250 overdraft facility that I never asked for. They sent everyone a letter a while back letting us know that they were changing their charging structure for overdrafts, its very convoluted and strikes me as a way of issuing penalty charges for going over your limit, but disguised as an "arrangement fee". Basically the rules are as follows:
1. You get an overdraft facility for 12 months (apparently whether you asked for it or not) so every year your overdraft is reviewed and this is called a "formal overdraft".
2. If you ask them to increase your limit at any point this is also a formal overdraft.
3. If you accidentally go over your limit by the tiniest amount, they automatically increase your limit temporarily and this is classed as an "informal overdraft".
4. Most importantly, all of the above events count as an overdraft review and you are only allowed one of these every six months, any more than that and you are charged a £25 "arrangement fee" each time.

Now this sounds as though you are allowed to go over your limit once every six months without incuring a fee, sounds pretty fair doesn't it? But hang on a minute....if the yearly review (you can't do anything about) counts toward this allowance, then you will always be within 6 months of your next/last review, and will have used up your "one free strike".

Here's an example: In my own case, I have hardly made use of my overdraft at all, I went over my limit by a grand total of £6.53 for the first time EVER, for two days, on 15th April. They didn't charge me for this because this counts as my one free "informal" review. However, the letter I got today told me that the automatic annual review was coming up on 30 May, and I would be charged a £25 arrangement fee for it! I called them and was told that this was because I had used up my one free strike on 15 April, when I went over by £6, and that's less than 6 months ago. I pointed out that that's effectively the same as penalising me by £25 for going slightly over my limit on 15 April, thinking they might see sense and agree to waive the fee, but they didn't so I have had to cancel my overdraft facility entirely to avoid the fee.

Thing is, is it actually possible to ever go over your limit and not be charged under this system? Say they do the automatic review on 30 May.....I can't go over my limit within 6 months of that, so if i go over before 30 November I get charged. Say I stay within my limit for that time and then go slightly over my limit on 1 December...I won't get charged for that, but I will then have an annual overdraft review on 30 May, less than 6 months later, and will be charged for that instead. Is my logic completely off? Or has first direct figured out a way of keeping things exactly the same whilst making them sound slightly different? And confusing the hell out of everybody.

Mark7799 wrote: »

I am not a FD customer so can only go on what's posted here. It sounds like they are trying to say if you go overdrawn you WILL get charged and are trying to get T's & C's watertight.

What happens if you have no limit and go overdrawn once in a twelve month period? Do you still get charged?

Yes. I cancelled my overdraft facility to avoid the fee, so now I have no overdraft limit. The person I spoke to on the phone made a point of letting me know that if I go overdrawn in the next six months, that will count as an informal request for an overdraft, which will be subject to the arrangement fee. So, I either have to be very careful for the next six months, or change banks....hmmm, tough call.....

And yes, it looks like First Direct are simply charging an overdraft penalty charge, but in disguise.

I wonder whether this system will make these "arrangement fees" exempt from being reclaimed as unfair penalties? It seems like a pretty blatant attempt to avoid refunding unfair charges by just changing the name. And its obviously in response to the court case. In effect, they are charging this fee every time a customer goes over their limit....sounds like a penalty charge to me. In fact, its even worse because even if you phone up in advance and ask to increase your overdraft limit, under this system, that will incur a £25 arrangement fee also. I dread to think what the other banks will come up with. I've just emailed First Direct to complain, lets see what happens...

greeneggsandham wrote: »

!!!!!! why dont they just charge interest on the overdrawn balance like the good old days!!!???!!!

I believe FD charge Interest on overdrafts over £250. Also A&L are now charging a £25 payment review Fee if you go over your overdraft. There seem to be very similar charges with other banks now as well.