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Credit Action calls for greater consumer awareness following Supreme Court decision on overdraft charges

Financial education key to avoiding harmful effects of current system

Money education charity Credit Action is disappointed at the Supreme Court decision to overturn earlier court rulings that allowed the Office of Fair Trading to investigate the fairness of charges for unauthorised bank overdrafts. Credit Action believes a lot of work now needs to be done to improve consumer education and awareness to help people avoid falling into situations where they incur high fees and charges.

Commenting on their decision, the judges pointed to the fact that the charges were not concealed and consumers knew what they were in for when they signed up for the accounts.

Addressing this point:

Credit Action believes that many consumers lack the financial capability to understand technical financial terms and processes, and that a greater focus on financial education to help address these issues will help prevent consumers from regularly falling into over-indebtedness.

It also believes that both the banks and the wider financial services industry have a responsibility to ensure that customers are fully aware of all possible fees and charges that may be accrued from use of their products.

Chris Tapp, Director of Credit Action, comments:

"The problem with bank charges has come from two sources. Firstly, from the banks not being as transparent as they should about the pricing involved, but secondly, from ill-educated consumers who often do not take the trouble to really understand the financial products they have.

"If we are to move forward from here then it is absolutely vital that banks and consumer groups work together to help people understand and manage their money as well as possible and thus avoid many of the costly and harmful effects of the current system. Today's ruling should be seen as giving impetus to that task and not giving licence to continue with ‘business as usual'."

-ends-

• For more information please contact the director Chris Tapp on 0207 380 3391 or at c.tapp@creditaction.org.uk

 

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Claire Lewis
Comment
Overdraft charges
Thu November 26, 2009, 13:22:53

With regards to the problem with bank charges to a certain level I would agree that banks should outline the pricing more clearly & in a simpler format so that it reaches all levels of consumers. Having said that I would like to think I am personally educated to a level that I fully understand the pricing structure but being on a low income and being a single parent have really felt the effect of the current economical climate. At the very moment in time I am becoming increasingly aware of the fact I am in financial hardship & have difficulty in managing my money that the bank does not help me in any way shape or form. Each month charges are applied to my account for unauthorised overdraft fees, direct debit return fees along with interest at the very time I am in a finacial crisis. If I were to ask the bank for a loan to consolidate credit cards etc to reduce my monthly outgoings I would not be accepted at this time for a loan offer due to the fact I have been over my authorised overdraft facility on numerous occasions in the last six months. However in July of this year before the credit crunch had hit me I was offered a loan amount of £15,000 as my credit history wih them, and everybody else was excellent.
I feel that if you have a stable income and are able to pay your bills on time each month and are not in financial difficulty then you are offered a variety of advantages including lower rates on various products as well as offers on loans & credit cards etc but as soon as you really need help (whether consolidating is a good idea or not)you find that you are now not able to benefit from these facilities anymore but you are increasingly becoming deeper & deeper into debt as the charges each month become higher & higher until suddenly you are paying up to half of your income to the bank. People who are struggling to live are encountering deeper hardship because banks do not understand that if you do not have enough money to pay your bills in the first place then by applying rediculous amounts of charges every month they are only placing more difficulty on the person. If you have money they want to give you more when you need money they take off you, I cannot see how they are allowed to take hundreds of pounds off people that are trying to live each month on the amount they take!!
Of course those who stay within the pricing structure should be rewarded but those who cannot due to the current economical crisis or are involved in a marital seperation, for whatever reason they are finding themselves in financial difficulty should not be helped by the banks to become further in debt by being charged huge amounts each month.