What are your rights if your bank experiences an outage?

Bank outages are rare, but when they happen, customers can experience significant disruption. From missed bill payments to incurring overdraft charges, the inconvenience caused can include substantial financial losses. Typically, bank outages only last a few hours before the issue is resolved.

But in some cases, they can last several days, causing significant distress in the process, particularly where the customer relies solely on their bank account to make and receive payments.

Back in February, thousands of banking users across the UK were unable to access major banks like Lloyds, Halifax, TSB, the Bank of Scotland, and Nationwide. The issues were resolved within a few hours, but still caused disruption. The February outage was the second consecutive payday outage to affect banking customers. Earlier this year, in January, Barclays' apps and mobile banking went down during an outage which lasted several days. This outage impacted several house purchases and caused some people to miss the official HMRC self-assessment payment deadline.

Below, we explore what you should do if you've been affected by a bank outage and suffered losses as a result.

What are your rights as a consumer?

If you have suffered financial losses that were the fault of your bank, the bank should ensure you are put back in the position you would have been in if the bank had been working correctly. This means that, in theory, you should be compensated for any additional charges, interest, or late payment fees you incurred due to the outage.

The Financial Ombudsman Service (FOS) have the power to award up to £430,000 for complaints referred to them after April 2024 - an amount which will cover most customers' financial losses. In some cases, they may even instruct the bank to pay interest on top of the money owed as well as potential compensation for the distress and inconvenience caused.

However, your first port of call will be your bank in this circumstance. They may themselves offer financial compensation in addition to extra compensation for any distress and inconvenience caused. You would typically only contact the Financial Ombudsman once you've exhausted the complaints process through your bank and if you aren't happy with the outcome.

Can you claim for mental distress and non-financial losses?

Typically, you won't receive compensation for minor inconveniences like an insignificant typo in a letter from your bank or having to wait on the phone to contact your bank. But, in some circumstances, you may get additional monetary compensation for the mental distress and inconvenience you experienced. It's worth outlining how the outage has impacted you when you make your claim as the bank may offer additional compensation on top of what you are owed. Banks typically review claims and award compensation on a case-by-case basis and the amount you receive could vary.

However, the FOS has guidelines on how it processes claims relating to distress, inconvenience, pain and suffering as well as damage to reputation. One-off incidents, including small administrative errors may attract an award of less than £100, but for the most extreme cases, the FOS could award more than £5,000. If you're vulnerable, this may result in higher compensation as the impact of the mistake could be greater.

As such, it's worth mentioning how the outage impacted you when raising your claim, as your bank may wish to offer additional compensation on top of compensating you for the financial losses you incurred.

How to claim if you've suffered losses due to a bank outage

The Financial Ombudsman exists as a last resort. This means that you will only contact them if you can't resolve the issue with your bank. As such, your bank will be your first port of call if you think you're entitled to compensation. If the compensation is due to a widespread outage, as has recently happened with Barclays, the bank may have its own specific compensation process that it'll ask you to follow. This may involve calling them, filling out an online form, or emailing.

Here's how to ensure you receive the compensation you're entitled to:

1. Keep records of losses - The bank should endeavour to put you back in the position you were in prior to the outage. To make sure that they do, it's worth ensuring you have evidence of the financial losses you've incurred during the outage, including bank statements and receipts showing extra charges incurred.
2. Get in touch with your bank to request compensation - The bank may have a compensation process in place but if not, get in touch with them through one of the usual customer service channels to ensure your compensation request has been logged. Make sure you describe the financial impact as well as any mental impacts the outage has had on you, so you receive all of the compensation you're entitled to.
3. Follow up with an email - So that you have a record of the compensation claim, it's worth following up with an email, particularly if you logged your claim via the phone. This is so you have evidence in writing that you've logged your request. The bank should also keep records of communications they've had with you, but it's always a good idea to keep your own records.
4. If you're unhappy with the outcome, begin the formal complaints process - Every bank should have its own formal complaints process. If the compensation offered is insufficient and the bank won't budge, you should begin the complaints process, as it can take up to eight weeks after you've initiated it to be eligible to take the matter to the Financial Ombudsman.
5. If you're still unhappy with the outcome, raise the matter with the Financial Ombudsman - If you haven't had a response within 8 weeks of raising your complaint or the response is unsatisfactory, you could raise the matter with the Financial Ombudsman Service. The FOS is completely free to you and will review the case on its merits to decide if your bank should offer you compensation and how much.

How to protect yourself from the impacts of a bank outage

It's impossible to fully protect yourself from the impacts of a bank outage. It's likely your bank will compensate you for your losses after the outage. That said, if an outage happens and all your money is locked in your bank account, this can cause a lot of distress as you may be unable to pay for basic day-to-day expenses.

There are steps you can take to ensure you're not completely out of pocket while your bank resolves technical issues. Here are a few ideas to get you started:

1. Always carry cash for day-to-day expenses - While many people no longer carry cash, a bank outage is a good reminder of why it's always important to have cash on you so you can pay for day-to-day expenses like food, toiletries, and travel.
2. Use alternative ways to access your bank account - In some cases, the technical issues may only affect the app or browser version of your bank. Ensuring you have your bank details to hand and keeping your bank app updated is a good way to ensure you can use all the ways available to you in the event of an outage.
3. Consider opening a second bank account - Opening a second bank account with a challenger bank like Monzo or Starling is free and quick. It can help with managing your finances and provide extra perks like better exchange rates abroad. In the event of an outage, it can be a good way to pay some of your bills, particularly if you hold a portion of your funds there.
4. Consider switching bank accounts - If your bank experiences technical issues often, you may want to consider switching bank accounts. You can check out the latest switching offers in our article on the topic which we update frequently.

While a bank outage can cause significant distress and leave you out of pocket, you'll likely be compensated for your financial losses and possibly for the distress you experienced as well. Remember to keep a record of the expenses you've incurred so you can submit a compensation claim once the outage is resolved.