What are your compensation rights when your bank undergoes a meltdown

As TSB struggles with its tech yet again, we take a look at your rights when things go wrong

Life's a glitch: TSB boss Paul Pester outside a branch of the bank he no longer runs (PA)

Another week, another upgrade, another technical crisis propelling TSB back into the headlines.

Services were out of action on Friday night for a few hours of planned maintenance work but over the weekend some customers complained they couldn’t access their accounts. Some couldn’t log on via the app or mobile banking, others said they could no longer see their accounts.

Good service appears to have now been restored but it was the final straw for TSB CEO Paul Pester.

He had presided over the meltdown in the spring that saw almost two million people lose access to their accounts, with some being shown other people’s banking information and thousands left vulnerable to fraud. This week, he resigned with immediate effect.

The bad news for customers is that many high street banks will need to carry out upgrades; old databases are struggling to cope with the sheer volume of online banking interactions we now carry out.

It’s to be hoped that other banks are able to upgrade their tech as they need to without such widespread disruption to their customers but it’s also a good idea to know your rights if things do go wrong. So what are they?

You shouldn’t be out of pocket

Earlier this year during its prolonged crisis, TSB announced it would waive all overdraft fees and charges for both personal banking customers and small businesses.

Most banks and financial organisations would offer a similar promise if their error had caused the problem. If they didn’t then their customers would be able to raise it with the Financial Ombudsman.

But some account holders may incur indirect costs. For example, they paid a bill late and so were hit with a penalty charge.

In those cases TSB agreed to refund anyone left out of pocket, however, with any bank it’s essential to keep a clear note and evidence of any extra costs and you will need to prove you’re out of pocket in order to claim.

One important note – if a banking outage means that you miss a payment then it’s really vital to check your credit score shortly afterwards. Missed bills can leave a mark on your credit file but you can contact the credit agencies and let them know what went wrong, meaning they can fix your score.

Failing to do so might mean you end up being charged more for credit the next time you apply for a loan, credit card or mortgage, and that would be hard to prove to the bank in a fight for compensation.

If your wages are late, your boss needs to deal with it

When a business account is hit by an outage, there may be a knock-on effect on their employees. If wages are delayed then employees need to raise their difficulties with their employer who can then challenge the bank.

After all, only the business has a relationship with the bank – the costs they reclaim can include any costs their employees reclaim from them.

When it’s significant

If a banking outage hits on a day when you just absolutely needed access to your money it can have devastating consequences.

Perhaps you needed to make a payment for something emotionally powerful like a wedding dress. Perhaps you needed to complete on a house purchase with funds held in your account. Perhaps you were on holiday and needed spending money.

For such serious and highly emotional claims, it can be hard to demand the full amount back from your bank. They may be able to reimburse additional solicitors’ fees but they are very unlikely to reimburse a customer for the cost of a house move, and quite unlikely to pay for the inconvenience of being without cash on a break, or the heartache of not getting a wedding dress made on time.

The best thing to do in those situations is to keep a careful track of any specific costs you can directly show are the result of the outage and take your claim promptly to the bank.

According to the Financial Ombudsman, customers can claim for specific losses they incur due to a bank’s technical problems but claims depend on the specific circumstances. You can find details on making complaints here.

You always have the right to switch

In the week following the TSB banking chaos back in the spring, the comparison site GoCompare saw a 100 per cent increase in the number of people using its current account comparison service.

Georgie Frost, consumer advocate at GoCompare, commented then: “If you’re unhappy with your bank, or looking to get more from your money, switching current accounts is easier and quicker than you might think. You could even get a ‘golden hello’ with some banks offering some worthwhile incentives for those that make the leap…

“It shouldn’t just be all about the switching bonus though. You could also benefit from a higher rate of interest on your balance or a free authorised overdraft, depending on how you tend to use your account.

“As the TSB situation has shown, good customer service goes a very long way. Research what other customers have said. You should also consider how you plan to interact with your new bank – do you need a bank with a branch close by or just a great mobile app service. Either way, make sure the account is right for you.”

The traditional high street banks and brands face a great deal of competition from new fintech companies and challenger banks. Perhaps the biggest challenge they face, and the one that could lose them the most customers, is upgrading old systems without causing difficulties for account holders. Doing so costs more than money, it risks losing goodwill too.