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Bank Rip Off Scandal - MPs Demand Statement from OFT

June 14, 2006 3:40 PM

WalletThe five Cornish Liberal Democrat MPs have written to John Fingleton, Chief Executive of the Office of Fair Trading (OFT), demanding a statement about the continuing scandal of banks ripping off their customers with unlawful default charges to the tune of billions of pounds each year.

The OFT started an investigation into credit card default charges nearly two years ago. These charges are imposed by credit card companies on customers who are a few days late in making their monthly payment or when they exceed their credit limit. The charges have been typically about £25 per incident and many customers have incurred hundreds or even thousands of pounds in these charges over a few years.

The OFT's report in April 2006 declared that these charges were, in the OFT's view, 'unlawful' and the banks were instructed to reduce the level of charge to no more than £12. A deadline of 31 May was given for the banks' responses with a threat of court action if they failed to act. The OFT also said that it considered that the same principles apply to other default charges such as those on current accounts. Consumer groups such as Which? have estimated that the penalty charges on current accounts amount to more than £4 billion per annum.

The deadline has come and passed with some of the banks admitting that they would reduce their charges but refusing to enter into any public discussion of why they are agreeing to reduce their charges. And the OFT has failed to make a public statement about whether or not it is satisfied with the banks' responses on the particular issue of credit card charges. Neither has it said what it intends to do about the larger problem of current account charges.

Andrew George, MP for West Cornwall and Isles of Scilly constituency of St Ives, has written to Mr Fingleton on behalf of the 5 Cornish MPs. Mr George has previously made representations to the OFT Inquiry and has raised Parliamentary questions, and is particularly concerned that low income earning regions like Cornwall have more families that suffer at the hands of the banks than many other areas.

Mr George said:

"The lack of action or statement by the OFT is sadly typical of their manana attitude to the financial worries which thousands of local income families have. Bank customers have been ripped off for years and it has a duty to take action. But, after two years, we still do not know what is going to happen.

"At least two of my constituents have taken their banks to court and recovered thousands of pounds unlawfully taken from their accounts; and I know that Truro County Court has seen at least 7 successful cases brought against banks. The banks are unwilling to go to court to defend their position because they know that they would lose.

Falmouth and Camborne MP Julia Goldsworthy, who is also the Liberal Democrat Shadow Treasury Spokesperson and who has previously written to banks on this issue said:

"Poor individuals should not be left to fight the large corporations; that is the OFT's job. The OFT must make a clear and unambiguous statement immediately to tell us what it intends to do about this scandal.

"The behaviour of the banks shows just how little they care about ordinary people. The Labour Government's silence on this issue shows where their priorities lie too. All of Cornwall's Liberal Democrat MPs are united in our demand for banks to end these unfair charges."