Parliamentary.ai

Overview

The Prevention of Excessive Charges Bill aims to protect consumers in England, Wales, Scotland, and Northern Ireland from excessively high charges and fees imposed by businesses for breaches of contract or exceeding credit limits. It sets a maximum charge of 2.5% of the actual value of the default or overdraft.

Description

This bill limits charges levied on consumers for contract defaults or exceeding credit limits. Specifically:

• Contract Defaults: For agreements under the Consumer Credit Act 1974 or any consumer contract, charges for default cannot exceed 2.5% of the default's value.
• Overdraft Limits: In banking contracts under the Consumer Credit Act 1974, charges for exceeding overdraft limits cannot exceed 2.5% of the overdraft amount.
• Definition of Consumer: A "consumer" is defined as a natural person acting outside their trade, business, or profession.
• Penalty Clauses: The bill doesn't affect existing laws prohibiting penalty clauses in contracts.

The Act will come into force two months after being passed and applies to England, Wales, Scotland, and Northern Ireland.

Government Spending

The bill is not expected to directly increase or decrease government spending. The potential impact on government revenue could be indirect, depending on changes in consumer behaviour and the potential for reduced revenue for businesses affected by the legislation; however, no specific figures are available within the provided bill text.

Groups Affected

The bill will affect:

• Consumers: They will be protected from excessive charges related to contract defaults and overdraft limits.
• Businesses: Businesses, particularly those operating under the Consumer Credit Act 1974 (e.g., banks and credit providers), will need to adjust their charging practices to comply with the new limits. This could affect their profitability.