Credit card penalty charges indefensible, says watchdog
Jill Treanor Wednesday January 26, 2005 The Guardian
A senior banking regulator will today condemn bank and credit card penalty charges that hit consumers for about £400m a year as indefensible.
Seymour Fortescue, chief executive of the Banking Code Standards Board - which polices the banking code - will tell an audience of bankers such charges contribute to the industry's poor image.
Stressing that he is speaking in a personal capacity, the former banker will say: "If I were still a poacher I'd have a real job defending these charges. They do not appear to be related to the costs, they frequently hit those least able to pay them and they generate great resentment."
He will stress that the banking code is not supposed to tackle the way the industry prices its financial products.
"It is a great pity that the requirement to pre-notify charges for standard account services 14 days in advance does not also apply to these penalty charges, where prior warning is needed much more," Mr Fortescue will say.
"Free banking is great and something that most of us benefit from. However, the existence of such a substantial loss leader does not mean you need to recover that loss from cross-selling and from charging for every service possible. That leads, in the case of penalty charges, to much cross subsidisation and potential criticism of the industry."
The BCSB does not have the power to fine companies that breach the code but it can name and shame offenders.
Mr Fortescue will say that the self-regulation of the code - the last major use of self-regulation since the Financial Services Authority was formed - has been working. He is concerned about the amount of regulation coming through from Brussels and will urge politicians and civil servants to be more rigorous in opposing legislation from Brussels.
He will say the code had worked in helping to provide basic accounts to people who had previously not had relationships with banks and helped to create summary boxes on credit card statements about charges.