Page 68 - ONLINE LEARNING LIBRARY

2 Exploration of debt

powers to improve the means by which early repayment charges are calculated.
Subsequently, a protracted legal dispute between the lending institutions and the OFT, on
the issue of bank charges in the late 2000s, ended in defeat for the OFT in 2009. In 2010,
however, the incoming Conservative/Liberal Democrat coalition Government announced
its intention to end ‘unfair’ bank and other financial transaction charges, with plans to ban
‘excessive’ interest rates on credit and store cards (BBC, 2010).
Additionally, with the acquisition of several UK lenders by other banks and building
societies – combined with the withdrawal of some foreign banks from their operations in
the UK as a result of the financial crisis – fears started to be expressed in the late 2000s
that less competition among lenders might allow them to secure larger profits.
In contrast to banks and other incorporated companies, building societies have no
shareholders since their customers in effect own them, and so they do not have to make
dividend payments. With the financial leeway this gives them, these mutual organisations
may charge lower rates of interest to borrowers.
For credit unions, the maximum interest rate that can be charged is set by law, and the
interest rate charged by the Student Loans Company (SLC) has, to date, been linked to
the rate of price inflation by law. However, changes to the arrangements for fees for higher
education in England, and to student loans to finance fee payments, presaged by the
Browne Report (Browne, 2010), mean that this linkage may not apply in the future.

19 of 43 http://www.open.edu/openlearn/money-management/money/personal-finance/you-and-your-money/content-section-0?utm_source=openlearnutm_campaign=olutm_medium=ebook Tuesday 5 May 2020