25th November 2009

Bank Charges

Issue

Key points

Exchequer Secretary to the Treasury, Sarah McCarthy Fry said:

"Consumers, who have been waiting a number of years, will be extremely disappointed with this outcome. It's clear that in the past, banks were not thinking enough about their customers. That needs to change for the future. While the decision on past charges has not gone in favour of consumers, we are determined to ensure the system is made fairer in the future. The Government will work with the OFT and FSA to reach a new framework for fairer bank charges going forward."

The new Financial Services Bill will provide greater power and protection for consumers in the future. This includes:

New powers for the FSA to force banks to pay damages where there has been misselling or abuse; and
new powers for consumers to take group action through the courts.

We are also promoting greater competition in the banking sector by ensuring that when we sell Northern Rock - and as Lloyds and RBS divest various parts of their business to meet competition requirements - these go to new or smaller players in the market. Because of this, consumers can expect to see 3 new banks on the high street within the next 5 years. That means more competition and choice on the high street.

The Conservatives have made the wrong judgements on financial regulation. They spent 10 years calling for deregulation and even as the crisis began George Osborne was welcoming a report calling for the abolition of all mortgage regulation. He opposed our action on Northern Rock. Now he would simply shift staff from the FSA to the Bank of England - causing massive disruption just when regulators need to focus on strengthening supervision and reducing risk.