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Penaltycharges - epetition reply
18 September 2007
We received a petition asking:
The setting of bank charges and their application is a commercial decision for each individual bank and the Government cannot comment on the commercial decisions of banks. This is an issue the Government takes seriously, and on which action is already being taken. Getting a fair deal for consumers is a fundamental part of the reforms that the Government is making to the consumer credit regime, through reform of consumer credit legislation and support for financial inclusion and advice.
For some time some customers of banks and building societies have been complaining about the charges they have paid for going into unauthorised overdrafts. Some institutions have settled with their customers, without admitting liability, and a large number of further complaints are in the pipeline. However, the law in this area is not clear and the current situation provides neither certainty nor consistency for consumers or current account providers. In these circumstances the Office of Fair Trading (new window) and some firms have decided to initiate a test case in the High Court to resolve legal uncertainties on the level, fairness and lawfulness of these charges. When the legal position on these charges has been clarified, firms will be required to deal with complaints within the normal timetable in a fair and consistent way.
Although it would not be appropriate for Government to influence the outcome of an investigation by the OFT, which is an independent body, the Government would like to express the Government's strong support for the principles of fairness and transparency which the OFT is applying.
If you would like more information, you can find answers to frequently asked questions on unauthorised overdraft charges on the Financial Services Authorities' website at http://www.moneymadeclear.fsa.gov.uk (new window)
18 September 2007
We received a petition asking:
"We the undersigned petition the Prime Minister to bring in new legislation to prevent the current abuse by banks and companys in relation to Penalty charges."
Details of Petition:
"This petition is to ask the government to bring in legislation that prevents banks or any company offering finance, or credit agreements from applying charges (Penalty charges) for items as Bounced DDs, bounced cheques going overdrawn, late payment or changes alike. We ask that the Government bring in legislation that before any company can apply such charges to a consumer that a Court, must rule that the level of charges outlined in the contracts that a company/organisation wishes to present to a consumer, is fair and reasonable and is compatible with the UTCCR. This will also better protect the consumer and the vulnerable who's only cause of action at the moments is to start legal proceeding against the company that has applied such charges. It will force companies to legally prove that their contacts are fair and transparent. we request that parliament make it a criminal offence for any Bank or company to take such charges from state benefits without a court approval/order."
Read the Government's responseDetails of Petition:
"This petition is to ask the government to bring in legislation that prevents banks or any company offering finance, or credit agreements from applying charges (Penalty charges) for items as Bounced DDs, bounced cheques going overdrawn, late payment or changes alike. We ask that the Government bring in legislation that before any company can apply such charges to a consumer that a Court, must rule that the level of charges outlined in the contracts that a company/organisation wishes to present to a consumer, is fair and reasonable and is compatible with the UTCCR. This will also better protect the consumer and the vulnerable who's only cause of action at the moments is to start legal proceeding against the company that has applied such charges. It will force companies to legally prove that their contacts are fair and transparent. we request that parliament make it a criminal offence for any Bank or company to take such charges from state benefits without a court approval/order."
The setting of bank charges and their application is a commercial decision for each individual bank and the Government cannot comment on the commercial decisions of banks. This is an issue the Government takes seriously, and on which action is already being taken. Getting a fair deal for consumers is a fundamental part of the reforms that the Government is making to the consumer credit regime, through reform of consumer credit legislation and support for financial inclusion and advice.
For some time some customers of banks and building societies have been complaining about the charges they have paid for going into unauthorised overdrafts. Some institutions have settled with their customers, without admitting liability, and a large number of further complaints are in the pipeline. However, the law in this area is not clear and the current situation provides neither certainty nor consistency for consumers or current account providers. In these circumstances the Office of Fair Trading (new window) and some firms have decided to initiate a test case in the High Court to resolve legal uncertainties on the level, fairness and lawfulness of these charges. When the legal position on these charges has been clarified, firms will be required to deal with complaints within the normal timetable in a fair and consistent way.
Although it would not be appropriate for Government to influence the outcome of an investigation by the OFT, which is an independent body, the Government would like to express the Government's strong support for the principles of fairness and transparency which the OFT is applying.
If you would like more information, you can find answers to frequently asked questions on unauthorised overdraft charges on the Financial Services Authorities' website at http://www.moneymadeclear.fsa.gov.uk (new window)
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