Millions of bank customers to benefit from improved current account measures
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Issued on 21 November 2011 - BIS
The
Department for Business, Innovation and Skills (BIS) and HM Treasury
have today published their response to the consumer credit elements of
the Government’s Review of Consumer Credit and Personal Insolvency.
The response builds on a number of Coalition commitments to
increase transparency and help consumers make better financial
decisions when borrowing money and deals specifically with:
-
unarranged overdraft charges;
-
introductory discounts when taking out a store card;
-
interest rate caps on credit and store cards;
- and other consumer credit issues, including high cost
credit.
Responding to consumer concerns about the lack of control and
transparency over bank charges, the Government has driven forward a
voluntary agreement which will apply to all full-facility current
accounts offered by the major banks.
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.
Balance alerts will be available from March 2012, with full
implementation of the other measures by March 2013 at the latest.
Consumer Minister Edward Davey said:
"We received a fantastic response to the review which has been
central to our vision to give consumers the tools they need to make
well-informed decisions when managing their finances.
“The package of measures we have set out will encourage
consumers to make better credit decisions and strengthen protection
where necessary - particularly for the most vulnerable.
“We are committed to responsible lending and will continue
working with the industry to improve consumer protections, particularly
in the high cost credit market, where we are speaking to the industry
to ensure that additional consumer protections are included in codes of
practice."
Financial Secretary to the Treasury Mark Hoban said:
“The public told us they felt overdraft charges were unclear,
and that it was unfair to be penalised for only going over your limit
by a few pounds. They also told us that consumers can be tempted into
taking out a store card by being offered a discount at the till.
“We’ve listened to these concerns and have worked with
industry to develop a strong package of measures in response. The
changes made as part of this review will empower consumers to make the
right decisions for them and encourage responsible lending practices.”
And from September 2013 a new guaranteed switching service
within seven days will give customers the confidence to switch accounts
quickly, safely and without hassle. This will mean that consumers can
make sure that they are getting a good deal from their bank.
On store cards, respondents to the Review were most concerned
about customers being tempted into expensive credit by retailers
offering discounts on their purchases at the time they take out a store
card.
Following negotiations with the Government, industry has
agreed to end this practice as well as introducing other measures to
improve the way store cards are offered, including a good practice
training scheme and a ban on direct commission for sales staff.
The Government will not be introducing a cap on interest rates
on credit and store cards. Following the review, the evidence showed
that a cap would not be in the best interest of consumers as pricing
some consumers out of the market could force individuals to seek
unregulated or high cost credit.
Another outcome from the review was the real concerns on the
high cost credit market, in particular its effect on vulnerable people.
The Government is today announcing that Bristol University's Personal
Finance Research Centre (PFRC) has been appointed to carry out research
into the impact of introducing a variable cap on the total cost of high
cost credit.
The Government has also started negotiations with industry to
introduce improved consumer protections in codes of practice for payday
lenders and other instant credit providers. In addition, the Government
is working to improve access to credit unions which can provide a real
alternative to high cost credit.
The voluntary package of measures announced in the Government
response to the review, including on bank charges and store cards, will
deliver real benefits for consumers far more quickly than waiting for
legislation. This is in line with the Coalition principles of freedom,
fairness and responsibility.
Notes
1. You can read the full response at http://www.bis.gov.uk/Consultations/consumer-credit-call-for-evidence?cat=closedwithresponse
2. The major banks that have signed up to the agreement are
Barclays, HSBC (including First Direct), Lloyds Banking Group
(including LloydsTSB, Halifax and Bank of Scotland), RBS (including
Natwest) and Santander. This represents over 57million current accounts
that will benefit from the changes.
3. Edward Davey announced there would be a review of consumer
credit and personal insolvency on 13 July 2010. You can see the press
notice on this here: http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=414423&NewsAreaID=2
The Call for evidence for the review was launched in October
2010. You can see the press notice here:
http://nds.coi.gov.uk/content/detail.aspx?NewsAreaId=2&ReleaseID=415992&SubjectId=15&DepartmentMode=true
The Government responded to the personal insolvency aspects of
the review on 19 July. Please see
http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=420481&NewsAreaID=2
4. For further information please contact Ed Smith on 020 7215
5945 or ed.smith@bis.gsi.gov.uk or the Treasury Press Office on 0207
270 5188
Further Quotes
Angela Knight, chief executive of the
British Bankers'
Association said:
"Banks are at the heart of initiatives to help customers
manage their finances and we understand the importance of being able to
keep track of your money.
"Banks set out the charges customers pay if they don't arrange
an overdraft before taking the money or where they go over an existing
limit. Nonetheless, we know it can be hard to keep on top of what is
going in and out when there are a lot of transactions going through the
account.
"We support the further commitment from the major banks to
ensure all their full-facility accounts will benefit from the option to
receive alerts and to have safety buffers. This will help prevent
customers incurring unintentional costs. Many of our members already
offer services to warn customers if they are close to zero or likely to
go over an agreed overdraft limit. However, the safest course of action
is still for people to contact their bank when an overdraft higher
limit is anticipated."
Stephen Sklaroff, Director General, Finance &
Leasing Association said:
“These new measures for store cards will ensure that consumers
can continue to enjoy the many benefits that retailers offer on the
High Street.
“We have worked with the Government, store cards providers,
retailers and consumer groups to agree a package of measures that
allows customers to make informed decisions about whether a store card
is right for them.”
Stephen Robertson, Director General of the British
Retail Consortium said:
“We know consumers value store cards as a route to convenient,
short-term credit. The proposed package is a common sense compromise
which will give people enhanced consumer protection while ensuring that
they can continue to access the benefits those cards offer.”
About the Author
© Crown Copyright. Material taken from the BIS Department for Business, Innovation and Skills. Reproduced under the terms and conditions of the Click-Use Licence.
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Article Published/Sorted/Amended on Scopulus 2011-11-22 12:51:23 in Business Articles
