Labour MP argues for fair banking charges

April 30, 2009 at 11:13 pm 1 comment

By Anna Rutter

Banks charges must be directly proportionate to the value of unauthorised charges in order to be fair and proportionate, Labour MP, Mohammed Sarwar has declared today.

Introducing his ‘Prevention of Excessive Charges’ Private Members Bill on Wednesday afternoon, a procedure which allows for backbenchers to introduce a Bill of their own before the House, Mr Sarwar argued that the eradication of high charges would provide banks with an opportunity that they had learnt how to act with fairness and responsibility, following the meltdown of the global banking system.

With figures at hand to highlight his point, he explained that the average bank charge for customers had jumped by £55 between 1997 and 2006; a 558 per cent increase in eight years. Furthermore, the charges tended to penalise people who were at their most vulnerable in life and bore no relation to the sums involved.

He told the House of a constituent who had suffered a loss in income due to sickness, and had been charged £184 for failing to pay four direct debits. The imposition of these ‘excessive charges’ was forcing hundreds of thousands of people into a cycle of debt and poverty, he added.

Turning to the regulation of consumer contracts which aim to protect consumers from excessive charges, Mr Sarwar asserted that there were two major weaknesses with the contracts; firstly that they required individuals to ‘opt in’, which meant taking court action whilst continuing to suffer from the charges; and secondly, financial institutions could evade consumer law by simply altering their terms and conditions.

There was now an overwhelming case for providing UK consumers with better legal protection against excessive charges, he stated, explaining that the Bill would overcome current statutory inadequacies by requiring any default charge of fee to be proportionate and fair.

Under the proposals, which would cover any contract regulated by the Consumer Credit Act 1974, banks would not be allowed to impose charges unless charges were valued at no more than 2.5 per cent of the transaction. This would ensure that the value of the charge was always proportionate to the value of the failed transaction, he said.

Presenting his Bill to the house, he called upon Members from all sides of the House to support the measures outlined in order to protect vulnerable people from excessive and unfair charges.

The Bill is to receive its Second reading on Friday the 16th of October.

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1 Comment Add your own

  • 1. banking  |  May 5, 2009 at 1:11 pm

    It’s a good news, he must do like that, Thanks a lot.

    Reply

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