To ask the Chancellor of the Exchequer what processes are available to consumers who wish to reclaim bank penalty charges; and if he will make a statement. (186311)

Generally, if consumers believe that they have been wrongly or unfairly charged by their bank, they should raise the issue with their bank in the first instance. If they are not satisfied with the response they obtain, then it is open to them to take a complaint to the Financial Ombudsman Service or to pursue a claim in the Courts.

On the issue of bank charges for unauthorised overdrafts and returned item fees, there is currently a test case before the High Court. This is considering the preliminary legal point of whether such charges are subject to the unfairness test in the Unfair Terms in Consumer Contracts Regulations 1999.

Until the outcome of this legal action is known, the normal complaint channels have been affected as follows:

the Financial Services Authority has granted firms a waiver from dealing with complaints within the usual time-table, except where consumers are in hardship. Rather, firms will record and store complaints and deal with them as quickly as possible once the legal action is resolved;

the Financial Ombudsman Service will also not progress complaints or deal with new ones, other than in hardship cases; and

the courts are generally suspending the hearing of cases.

Further information can be found on the websites of the Office of Fair Trading (www.oft.gov.uk) and the Financial Services Authority (www.fsa.gov.uk).

To ask the Chancellor of the Exchequer what discussions he has had with the Financial Services Authority on a moratorium on consumers reclaiming bank charges. (186350)

The Financial Services Authority has given financial institutions a waiver in respect of compliance with time limits for dealing with complaints related to bank charges while a test case on such charges is proceeding in the High Court. The Chancellor has been kept informed about the issues surrounding the waiver. However, responsibility for the waiver is a matter for the FSA, which is independent of Government.

To ask the Chancellor of the Exchequer what guidance his Department has issued to financial institutions on the rate of interest to be applied to reclaimed bank and credit card charges; and if he will make a statement. (186351)

None. The issue of fairness of such charges is a matter for the Office of Fair Trading (OFT), which is independent of Government. In April 2006, the OFT stated that credit card default charges have been generally set at a significantly higher level than was considered legally fair. A £12 threshold for intervention was set: where credit card default charges are set above this threshold, the OFT will consider whether an investigation needs to be launched. The OFT also believes that the unfairness test in the ‘Unfair Terms in Consumer Contracts Regulations 1999’ covers bank charges and is investigating whether these charges are unfair. In order to provide certainty on whether the unfairness test applies, OFT is currently taking a test case against the major UK banks in the High Court.