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  • Outrage at the Coalitions failed clampdown on unfair bank charge

    Outrage at the Coalitions failed clampdown on unfair bank charges.

    (Each party has made an offical response to this article see the full story)


    On the 21st November, the Department for Business, Innovation and Skills (BIS) and HM Treasury published their response to the consumer credit elements of the Governments Review of Consumer Credit and Personal Insolvency. They Claim that the Government has driven forward a voluntary agreement which will apply to all full-facility current accounts offered by the major banks, when they state:

    Under the new agreement, over 85 per cent of personal current account customers will benefit from measures to make charges for unarranged overdrafts clearer, fairer and more manageable. This includes annual statements so that customers can see how much their account costs over the year. Consumers will have the option to receive alerts when their balance is low so that they can take action to avoid a charge; and they will no longer be charged for going-over their limit by a small amount.

    They claim that this response builds on a number of Coalition commitments to increase transparency and help consumers make better financial decisions when borrowing money. Whilst this press release is good news on face value, the truth is that this does not build on the Coalition commitments at all. The Coalition gave an undertaking in their program for Government that it would bring in legislation to end unfair bank charges, it said:

    We will introduce stronger consumer protections, including measures to end (my emphasis added) unfair bank and financial transaction charges. (Sec 5):

    The truth is, it has failed to deliver. The Coalition government and the OFT has let down the thousands of consumers(including many on benefits) who have for years been ripped off by banks and are still forced to live below the poverty line because of unlawful bank charges. Whilst we accept that the idea of a text message will help some consumers, the truth is it will not help the thousands on low incomes that cannot simply top up their accounts. All it will do for them is give them notice that they are about too ripped off again, it will not stop the spiral of debt these charges can and do cause.
    The depressing fact is all parties stated that they believed these charges to be unfair and unlawful and the Coalition Government now seems to be saying that it is OK to apply unlawful charges, as long as consumers go overdrawn by more than a small amount. This is clearly yet another compromise by the Government to allow the poorest in society to continue to be ripped off. What is more it appears that the great changes being announced were actually the idea of the British Bankers Association, presented to the Government on 3rd November in response to pressure to reform. This is just another stalling tactic to keep the charges generating unlawful profits, and the government seems to have fallen for it again.

    The fight against unlawful bank charges has been ongoing since 2005, when Consumers Forum (formally the Penalty Charges Forum) launched and started helping consumers to fight against unlawful bank charges; this campaign led to millions of consumers taking legal action against banks, when the courts reported that the amount of claims had reached an unprecedented level. In 2007all claims were put on hold as the OFT decided to take legal action against the banks, but the OFT were invited by the banks to take this action, based on the arguments the banks wanted, unfortunately the OFT agreed to the banks terms, despite our advice to the contrary. The case was finally lost in the Supreme Court, although within the Judgment it was clear that the judges had highlighted the fact that the OFT could continue its claim against unfair banks charges, under Section 5.1 of UTCCR. Despite this, the OFT refused to do so, claiming they simply could not afford to unless the Government granted them additional funding. This hypocrisy left millions of consumers in the dark and millions of claims in a state of suspended animation.

    It was shortly after the Supreme Court handed down its judgment that all political parties launched into their election campaign and all three of the main parties stated that they felt bank charges were unlawful, stating that they would bring in legislation to stop them. When the Coalition Government was formed this promise was even written into the coalition agreement, so millions of consumers believed that at last the long fight for justice would soon be over.

    The Press release by the (BIS) has confirmed that the Government has failed to honor its promises. The inexcusable result of this announcement is that it has left millions of consumers in the dark, as well as ensuring that the banks can still apply unlawful charges to the poorest members of our society, who will continue to subsidise the free-if-in-credit banks accounts for the rich. Their only course of action is back to the courts, were they will face an opposition with unlimited financial resources.

    It was whilst waiting for the Government to keep its promise, that the Consumers Forum had no option but to launch another campaign against bank charges. This included designing new Particulars of Claim for consumers to use, followed by an online petition and emailing every single MP. The Consumers Forum has continued to help consumers fight against the unlawful practices of bank, the most noticeable case being Josie Lewis, in which the court held she had been harassed and prevented from leaving the bank. We even had a victory in court on 23rd November, even though the bank had sent a barrister against one of its own customers.

    On the 18th October 2010, Graeme Morrice MP tabled an Early-Day Motion in Parliament calling for the Government to end unfair bank charges as they had promised to do in the Coalition Agreement. Despite the careful wording of the motion to reflect the wording of that Agreement, not one Conservative MP has signed it and only one Liberal Democrat MP has.

    Therefore we have put the following question to the Conservative and Liberal Democrats.

    Do they not care that their party promised to bring in legislation to END unfair bank charges but they have failed to do so.? Alternatively, do they simply not care that thousands of consumers have been ripped off for years and now will continue to be ripped off by banks, taking money that does not belong to them?

    What is noticeable is many Labour MPs have all signed the EDM. Therefore, we have asked them one simple question, would they guarantee to bring in legislation if they were in power?

    Each partys response is below.

    A Liberal Democrat spokesperson said:

    "Liberal Democrats have long campaigned against unfair bank charges and your article acknowledges that the announcement is good news for bank customers. These measures will benefit millions of bank customers, not just by giving them warning of when they are close to their overdraft limit but by ending penalties for those who go over their limit by a small amount. Liberal Democrats are determined to give consumers more power, more choice and more information, and this is a big step in making sure we do so."

    A Conservatives spokesperson said:

    Their response is the same as the BIS response.

    A BIS spokesperson said:

    "Regulating in this area is not the Governments first instinct. There are better ways to achieve a positive result for consumers that have less impact on business and mean that consumers get the protections they need without having to wait months or years for them to come into force."We have worked with the banks to give consumers the right tools to take better control of their account and avoid or minimise unarranged overdraft charges. The measures agreed with the banks, coupled with the annual statements being rolled out from the end of this year and the seven day switching service, will provide a powerful way for consumers to hold their banks to account. "We would encourage those customers who use unarranged overdrafts regularly or for prolonged periods to review their spending patterns and seek help or debt advice, from their bank or from Citizens Advice. Under the new Lending Code provisions implemented earlier this year, the banks have agreed to act sympathetically, positively and proactively if they have reason to believe that a customer is in financial difficulty."All of this adds up to a good package of real and tangible improvements for consumers that will be delivered far more rapidly thanks to the voluntary measures than through any legislative approach"

    A Labour party spokesperson used a quote from their 2010 manifesto and said:

    Over the lifetime of the next Parliament, as more affordable lending becomes available, we will clamp down on the interest rates and other fees charged by instant loan companies and payday or doorstep lenders, tackling the very high cost lending that hits low-income communities hardest. We will introduce a single regulator for consumer finance to restore confidence and trust with responsibility for the supervision of all unsecured lending being passed to the Financial Services Authority. And new rules governing how financial products are sold will be introduced with a crackdown on unfair terms in contracts.

    Stephen Hone of the Consumers forum said:

    It is clear that the Liberal Democrats and the Coalition have failed to honor another promise, this article suggesting that they have reached an agreement with the banks behind closed doors, to the determent of the consumers that they are supposed to represent. Perhaps it is now time that political parties are held legally accountable to the public for the promises in their manifestos. Only then can the public have any faith in politics, because at the moment we have a system which allows a party to promise anything to get into power and then break those promises with no consequence.

    Whilst this forum accepts that this is very small step in the right direction, the truth is that it is a long way from what each party promised and clearly does not end unfair bank charges as outlined in the coalition agreement.

    We would urge all our readers to write to their MPs and ask them to sign EDM 2277
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