Okay, sorry guys/gals for not posting back in here.
Here's how it all went, after sending the original letter to the bank, I got the standard 'our charges are fair' letter from them, this actually crossed in the post with my second letter after the 14 days were up.
The second letter was ignored as expected, after the 14 days where up I went to moneyclaim. After a mistake of making myself the defendant and the bank the claimant I then resubmitted the claim and got the first one refunded
2 days following that I received a letter from HSBC's solicitors saying they intended to defend the claim and to submit my workings out. I sent these and then 3 days later received a letter stating they would settle for the full amount of £3251.73. Signed and sent, received money this morning
Thanks for all the advice.