Overview

The Prevention of Excessive Charges Bill aims to limit the charges banks and other businesses can levy on consumers for defaults or exceeding credit limits. It sets a maximum charge of 2.5% of the value of the default or overdraft.

Description

This bill makes it illegal to charge consumers more than 2.5% of the value of a default or overdraft. This applies to:

• Agreements under the Consumer Credit Act 1974 (covering various credit products): Charges for consumer defaults or failures to meet obligations cannot exceed 2.5% of the default amount.
• Banking services contracts under the Consumer Credit Act 1974: Charges for exceeding agreed overdraft limits are also capped at 2.5% of the overdraft amount.

The bill defines a "consumer" as an individual acting outside their trade, business, or profession. Existing laws prohibiting contractual penalty clauses remain unaffected.

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

Government Spending

The bill doesn't directly specify government spending. Its impact on government spending would be indirect, potentially through reduced consumer complaints and potential litigation costs following the introduction of the charge caps.

Groups Affected

• Consumers: Will benefit from lower charges for defaults and exceeding overdraft limits.
• Banks and Financial Institutions: Will face restrictions on the fees they can charge, potentially affecting profitability.
• Businesses offering credit agreements: Similar restrictions apply to those businesses covered under the Consumer Credit Act 1974.

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