Lib Dems leading the fight against unfair bank charges - Burt

Co-chair of the Liberal Democrat Parliamentary Business, Innovation and Skills Committee, Lorely Burt has been invited to advise the Coalition Government on introducing fairer banking practices.

Lorely Burt has campaigned against unfair overdraft and penalty charges and has been asked by Liberal Democrat Business Minister Ed Davey to advise the Government's Consumer Credit and Personal Insolvency Review.

A letter from Ed Davey to Lorely Burt is included below.

Commenting, Lorely Burt said:

"Liberal Democrats have been leading the fight against unfair bank charges.

"For too long the balance of power between banks and their customers has been skewed in the banks' favour. We want a system that is fairer for customers and that is what the Liberal Democrats in Government are determined to deliver."

Commenting further, Ed Davey said:

"The Government is committed to protecting the interests of consumers and Vince Cable and I are very keen to deal with the issue of unfair bank charges.

"That is why we have included the issue as part of our review of Consumer Credit and Personal Insolvency. If the evidence comes out in favour of action we will not hesitate to act.

"Lorely Burt MP and Which? have been very active in this area and we look forward to working with them."

Notes:

1. Lorely Burt has withdrawn a Private Members Bill on Financial Services as the Government has committed to a review of unfair bank charges as part of the Consumer Credit and Personal Insolvency Review. It was felt that the best course of action in order to further the goals of the Bill was to work alongside the Government in order to deal with this issue as part of this review. This allows Lorely to present the work she has done on the subject straight to the Department.

The legislation would have amended the consumer protection regulations to ensure that charges for unauthorised overdrafts can be assessed for fairness. Currently, all ancillary charges are incorporated into what are referred to as 'core terms' and therefore are consumers are not able to challenge these for fairness, regardless of whether they should have been aware of the charge when they entered into the contract. This leads to people being charged overdraft charges that are often highly disproportionate to the cost incurred and having no recompense against the bank.

2. The text of Ed Davey's letter to Lorely Burt is below.

Dear Lorely,

I would like to thank you for your work on the bank charges issue, which has led you to introduce your Financial Services (Unfair Terms in Consumer Contracts) Bill. The Bill seeks to amend the Unfair Terms in Consumer Contract Regulations (UTCCRs) to ensure that ancillary pricing terms in personal financial contracts can be assessed for fairness. The issue at the heart of the Bill directly addresses the Coalition commitment to introduce stronger consumer protections including measures to end unfair bank and financial transaction charges.

As you know Vince Cable and I have been very keen to deal with this issue recognising the potential for significant consumer detriment in this area. This is why we have included the issue of unfair bank charges in the joint HMT/ BIS Consumer Credit and Personal Insolvency Review and we issued a formal call for evidence as part of this Review on 14 October. This Review will consider whether the current voluntary, market-driven initiatives that are being taken forward by the Office of Fair Trading (OFT) and Lending Standards Board (LSB) sufficiently address concerns about unarranged overdraft charges and whether they are likely to deliver sufficient improvements for consumers. Government are clear that if evidence comes out in favour of action we will not hesitate to act to protect the interests of consumers.

In addition we recently issued a Government response on a separate Call for Evidence to inform our negotiating position on the Consumer Rights Directive. This response illustrates the breadth and complexity of the issues and sets out that there is not a strong enough case, at this stage, to put forward an amendment to the Consumer Rights Directive which will enable charges outside of the "essential bargain" of the contract to be assessed for unfairness. The Government prefers to give itself more time to consider this issue.

I am grateful that, for the reasons set out above, you have agreed to withdraw the Bill at this stage. I am also grateful to you for kindly agreeing to work with my officials as we develop our thinking on the best way to tackle this issue in light of the evidence received as part of the Consumer Credit and Personal Insolvency Review.

I also want to take this opportunity to pay credit to Which? who have tirelessly campaigned on this issue. We welcome their close and continued engagement on the Consumer Credit and Personal Insolvency Review and look forward to working with them as we assess the evidence and develop a Government response.

I have placed a copy of this letter in both libraries of the House.

Edward Davey