By Rory Cahill
Pressure is growing from within Labour for the UK Government to use its leverage over banks which have required multi-billion-pound bailouts to force the institutions to stop levying expensive charges.

Prospective Labour parliamentary candidate for Glasgow Central Anas Sarwar has written to Chancellor of the Exchequer Alistair Darling and Secretary for State Jim Murphy to suggest that if the Government does take substantial shareholdings in Scottish-based institutions like RBS and HBOS, it ensures that the banks introduce “reasonable” overdraft and current account bank charges.

Sarwar is supported by Mike Dailly of the Govan Law Centre, who issued the first free forms on the internet for those caught by charges to use to reclaim them.

The Office of Fair Trading is currently involved in court action to decide whether it can force banks to repay charges, and the banks are currently permitted to keep charging for unauthorised overdrafts.

In his letter to the Chancellor, Sarwar says the charges can leave those on low incomes trapped in a cycle of debt, and argues the UK Government, which has bailed out banks, must ensure such charges are reduced dramatically.

“A typical example is where a worker’s salary is late by a day and they find that three direct debits are unpaid. Many banks will impose a £117 charge - £39 per unpaid direct debit - together with a monthly charge of £28 and unauthorised overdraft interest at 30 per cent APR. For someone on minimum wage, just one set of these charges can represent almost a week’s pay.

“That worker still has to pay their direct debits, but their hardearned salary will be taken to meet the bank’s charges. Often they cannot catch up and next month will be subject to another set of charges, and so on and so forth until their family has very little to live on and are trapped in a cycle of debt and poverty.

“With the UK Government about to take a majority shareholding in RBS and the largest shareholding in HBOS, the UK Government will shortly be in an unprecedented position to suggest that the time is right for RBS and HBOS to introduce reasonable overdraft and current account bank charges.”

Dailly, who pioneered the campaign to reclaim charges off banks, says the banks would do well to appreciate the PR potential of voluntary reducing the charges to a level where they simply cover administrative costs.

“It would be a show of good faith on the part of the banks. They could say, especially at this time of financial crisis, ‘We’re trying to help society’. Given how much they have taken from society recently, it would be good to see them put something back,” he said.

Irish bank customers could face increased bank charges as the institutions seek to recoup the €1bn they will be charged by the Irish Government to take part in the scheme guaranteeing their deposits.