Skip to main content

Overdrafts (Credit Charge Advertisements)

Volume 115: debated on Wednesday 29 April 1987

The text on this page has been created from Hansard archive content, it may contain typographical errors.

12.

asked the Secretary of State for Trade and Industry whether he will consult the chairmen of the clearing banks and the Bank of England concerning the advertising of credit charges on overdrafts.

The exemption of bank overdrafts from the full documentation requirement of the Consumer Credit Act serves the interests of both banks and their customers. However, my hon. Friend the Minister for Trade told the hon. and learned Gentleman on 10 April that it might be appropriate for banks to provide more information to consumers about credit charges on overdrafts, and my officials are consulting banks and the Office of Fair Trading on this matter.

I welcome some movement in the direction of sanity. However, do the Government not recognise that the combination of the banks' right to charge whatever interest they please on what they choose to call unauthorised overdrafts, and the banks having no duty whatever to tell people what interest will be charged on such overdrafts, is a scandalous rip-off.) It is not enough simply to say that the officials are having consultations with the banks. What steps, if any, do the Government propose to take to stop this practice?

My hon. Friend the Minister for Trade explained in full in the debate on 10 April the reason why further action of the kind that the hon. and learned Gentleman thinks appropriate would not be in the interest of either the banks or their customers. We are seeing what can be done to make more information available.

While I should not like to encourage the Government to interfere in any private arrangements over overdrafts, should not my hon. and learned Friend at least encourage all the credit card companies to publish the overdraft charges and the APR available so that at least my constituents and those of any other Member can shop around? There is no question of being ripped-off, but at least customers should be allowed to shop around.

Will the Minister confirm that the burden of debt facing millions of households is not only up on an astonishingly high level but is increasing at an extraordinary pace? Are the Government to continue their lack of concern about this serious matter?

I cannot see how this arises out of a question on charges on overdrafts. However, the debts to which the hon. Gentleman referred are backed by increasing assets.

May I put it to my hon. and learned Friend that there is a legitimate subject of concern in the questions raised today? Some of the average rates of interest charged both on overdrafts and on credit card deficit balances amount to usury, if not exploitation, given that there has been a further fall in base rate today to 9ยท5 per cent. and we may be looking forward to a further fall. This is not a matter for the Government to get involved in private arrangements, but I do think that they could send some signals to the private sector.

The only real point of concern is whether information is given to consumers to enable them to make properly informed decisions. The Consumer Credit Act 1974 ensures that that information is available. Overdrafts that have not been previously agreed are a special case and, for the reasons that were explained in the Adjournment debate to which I referred earlier, I am asking the banks to consider what further information can be made available to their customers.