Compensation when your bank's systems go down

When a bank's app, cards or payment systems stop working, the outage itself is usually short. The bill it leaves behind can be longer: a Direct Debit that bounces, a wage that arrives late, an overdraft charge, a missed mortgage payment. The Financial Ombudsman Service, which settles disputes between customers and banks, says the losses it can look at include wages paid into your account late and your bank charging you for going overdrawn¹.

There is no automatic payout for an outage. What you can do is ask your bank to put you back in the position you would have been in, and if it refuses, take the complaint to the ombudsman free of charge. In one case the ombudsman published, a customer called Amelia could not use her banking app and thought her card was not working during an IT failure. There was only evidence of one missed payment from her account, and her bank accepted it was caused by the outage².

The rules that matter are simple. Your bank has eight weeks to investigate a complaint and give a final response³. Your deposits are protected up to £120,000 per person, per authorised firm, by the Financial Services Compensation Scheme, though that covers a bank failing, not a system going down⁴. And if fraudsters use an outage to trick you, you will usually get a refund if the payment was not authorised by you and you report it quickly⁵.

What an outage can cost you

The costs of a bank outage are rarely the outage itself. They are the knock-on charges. The ombudsman lists the kinds of loss it can consider: your wages paid in late and your bank charging you for going overdrawn; missed payments to other people who then charged you; delayed savings payments that lost interest; lost trade for a small business; and extra costs such as phone calls, travel or legal bills, including delays in buying a house¹. Consumer reporting adds missed bill payments that lead to late payment fees or overdraft fees, and a negative effect on your credit score⁸.

Overdrafts are where most of this lands. MoneyHelper, the government-backed money guidance service, says there are usually fees or interest if you spend more than you have in your account, including when there is not enough to cover a Direct Debit or standing order⁹. Northern Ireland's nidirect service sets out what an unarranged overdraft can trigger: a penalty charge and a high rate of interest, charges for reminder letters and for direct debits or cheques put through the account, and the bank may freeze the account until the overdraft is paid off³. Independent debt guidance is blunter: you may be charged a fee if you go into your bank account overdraft, and if you cannot repay it there could be further consequences¹⁰.

The point for a complaint is causation. A charge that would have happened anyway is not the bank's responsibility. A charge that happened because the bank's systems were down is the kind of thing the ombudsman can order the bank to put right.

How to complain to your bank: eight weeks for a final response

Start with the bank's customer services. If that does not resolve it, make a formal complaint. MoneyHelper's guidance on joint accounts sets out the sequence: complain to the bank, then make a formal complaint, and the bank has eight weeks to investigate and give a final response¹¹. For complaints about anything other than payments, the deadline is eight weeks¹². MoneyHelper's guidance on shopping safely online repeats the same timeframe: your bank will investigate and let you know the outcome within eight weeks².

Keep the evidence. Statements showing the charge, the date of the outage, any message from the bank about it, and a note of what you lost. The ombudsman's Amelia case turned on a single missed payment that the bank accepted was caused by the outage².

If the bank cannot deal with your complaint by the day after it receives it, it should contact you to let you know it is looking into it⁵. That is a courtesy, not a resolution.

Taking it further when the bank says no or does not reply

The Financial Ombudsman Service is free to consumers and its decisions are binding on the bank. Independent debt guidance sets out the conditions: the service can only help if you made a complaint to the creditor, they had a chance to look into it and reply, and in most cases you need to wait eight weeks¹³.

If the money at stake is a payment that went to the wrong place, your bank is required to give clear and accurate information on the options available to you, which may include making a complaint or taking court action against the recipient⁶. That is a different route from an outage complaint, but it matters if an outage caused a payment to go astray.

Beyond the ombudsman, the courts are the last resort, and the process has teeth on both sides. If you receive a court claim for money and do not respond, you might have to pay more or get a county court judgment¹¹. If you are owed money and the debtor ignores a statutory demand or cannot repay, you can apply to a court to make someone bankrupt or get a company wound up¹². If you are the one in difficulty, a bankruptcy trustee's requirements are not optional: you might face further court action if you do not cooperate¹³.

For most outage complaints, none of this is needed. The ombudsman route is free, and the bank pays for it.

Fraud during an outage: when you usually get a refund

Outages are a gift to fraudsters. The ombudsman says it hears from people who were scammed by fraudsters who used the bank outage to trick them into sharing their bank details, for example by pretending to call from the bank and offering to help¹.

The refund rules are separate from compensation for inconvenience. MoneyHelper's guidance on opening, switching or closing an account says to check transactions and report any you do not recognise quickly, and you will usually get a refund if it is fraud⁵. For authorised push payment scams, where you were tricked into sending the money yourself, your bank should provide the refund within five business days of you making the claim¹⁴. A bank can usually refuse a refund if you told them about the fraud 13 months or more after the payment was taken¹⁵.

The ombudsman has ordered redress in individual cases. In one BT impersonation scam case it ruled the customer's bank should refund the full £4,000, plus an additional £300 compensation for the trouble and upset caused¹⁶.

Your money stays protected: FSCS covers up to £120,000 per person

An outage is not a bank failure, and the two are covered by different things. The Financial Services Compensation Scheme protects you if your bank, building society or credit union runs into financial difficulty¹⁷. The limit is £120,000 per person or company, per authorised firm⁴. The same limit applies to credit union accounts: FSCS protects up to £120,000 in total across all accounts you hold with the credit union¹⁸. For banks, FSCS can pay back any money you hold with a failed bank or building society, up to its compensation limit of £120,000 per person¹⁹. The scheme's own badge wording is up to £120,000 per eligible person, per firm²⁰.

If a bank does fail, the money usually comes back quickly: you will normally get your money back within seven days⁶. Independent guidance confirms the £120,000 figure per individual, per financial institution, and notes that before 1 December it was £85,000²¹. Older guidance still quotes £85,000 per person, per provider¹⁴.

Moving your account if outages keep happening

Switching is a legitimate response to repeated outages, and the mechanics are well protected. MoneyHelper says that if you already have an existing bank account, you can ask your new provider to transfer your balance and all your incoming and outgoing payments over²². Banks guarantee that payments in and out of your new account are switched over in time so that you do not miss any regular bills and payments²³. If anything goes wrong with the switch, your new bank will refund you if you are left out of pocket²⁵.

Being overdrawn is not automatically a barrier. MoneyHelper states you can switch using the Current Account Switch Service even if you are overdraw¹⁷. Independent guidance goes further: some providers will even let you switch if you have a large overdraft debt outstanding, though there may be a charge to do this²². But not every bank will take you on: if you are currently overdrawn, you might not be able to switch bank accounts until you have paid off the overdraft²³.

Before switching, it is worth knowing what an overdraft costs you. Independent guidance describes overdrafts as carrying high interest and charges²⁶, and official guidance says you will usually pay expensive daily interest to use one, that it is a form of debt, and that it should only be used for emergencies or as a short-term option²⁷. Credit union current accounts offer access to borrow money using an overdraft, normally with daily interest up to 42.6%²⁸.

If you are weighing up whether to stay or go, the Current Account Switch Service handles the transfer, and switching while overdrawn covers the cases where a bank says no.

Where to get free help

MoneyHelper offers free, impartial guidance on current accounts, overdrafts and switching⁹. The Financial Ombudsman Service handles complaints a bank has not resolved¹. StepChange and National Debtline provide free debt advice if an outage has pushed you into arrears you cannot clear¹³. None of these charge, and using them does not affect your credit file: the ombudsman states that discussing your options will not have any impact on your credit file²⁹, and Experian states that a change to your credit report from switching does not affect your ability to get credit³⁰.