Money News: Lenders relent and cut penalty charges in half

Barclaycard, Lloyds TSB, the Halifaz, MBNA and HSBC announced they were going to slash charges on late or missed card payments from £20 to £12. Other lenders are expected to follow sooner rather than later.

The move comes after a ruling from the Office of Fair Trading (OFT) in April, when it threatened legal action over what it dubbed "unlawful" fees - unless credit card providers took steps to respond by the end of May.

Speaking at the time, OFT chief executive John Fingleton said the companies were overcharging customers to the tune of £300m a year, and that default fees had been set at a "significantly higher level than is legally fair".

Last week, the banks said that while they had decided to abide by the OFT's recommendation of a £12 level, they did not agree with its legal reasoning.

The lower fees come into effect from 28 June at Lloyds TSB, MBNA and HSBC, and 1 August at Barclaycard and the Halifax.

"The £12 cap should reduce confusion in the market and increase transparency and consistency across the industry," said Robert Kenley from the price-comparison service Moneysupermarket.com.

The website's findings show that the average penalty charge is £22.68, so a cut to £12 would mean providers' income is reduced by £159m.

However, warned Mr Kenley, providers faced with a loss of income will look elsewhere to recoup the money - probably in higher overall annual percentage rates.

The OFT has also suggested that other bank charges, such as those for overdrafts, should be cut. Banks have been given more time to respond to this recommendation.

Legal reforms: More rights for cohabitees

Unmarried couples who live together could be given more financial rights in the event of a break-up, under new proposals.

The Law Commission has published plans for legal reforms that could allow a partner in a failed cohabiting relationship to claim maintenance costs and a share of property and pensions.

Under the proposals, Britain's two million cohabitees who set up home together without getting married would be given similar legal protection to wedded couples.

Government-backed research shows most people wrongly believe that living together gives them the same rights as married couples. This is not the case, as a "common law marriage" has no legal recognition.

For example, unmarried people have no automatic right to benefit from a partner's private pension if they split up, or to inherit their property, even after a lifetime together.

"The law that applies if cohabitants separate is unacceptably complex," said Stuart Bridge, a member of the Law Commission. "It often gives rise to results that many people would consider unfair."

He added that there was a "strong case for introducing more suitable financial remedies" in some situations - where cohabiting couples have children, for example.

Under the proposals, the financial claims would be "more limited in scope" than under divorce laws, but would offer a safety net to those who have lived together for a certain period.

The recommendations are at the consultation stage. A full report, with suggestions for legislation, will be published by the Law Commission next summer.

Child trust funds: Parents stare gift horse in the mouth

The take-up of child trust funds remains stubbornly disappointing, with more than a third of the parents who have been sent their CTF vouchers failing to open a savings account for their children.

The Government began issuing vouchers ahead of the scheme's launch on 6 April 2005. By 20 May this year, a total of 2.49 million vouchers had been sent out, according to new figures from the taxman, but only a shade under 1.65 million, or two-thirds, had been invested.

This figure includes those vouchers issued to parents who have already missed their 12-month deadline to invest and been co-opted into a government-selected fund instead of choosing themselves where they want to put the money.

Despite high-profile TV and newspaper advertising campaigns, the figure for vouchers invested has refused to budge from this "two-thirds take-up" level.

"There's more work to do to reach new parents and to encourage the active involvement of those parents whose child has an account," admitted Ed Balls, Economic Secretary to the Treasury. More promotional work is now planned for September.

Under the CTF scheme, all children born on or after 1 September 2002 are entitled to a £250 voucher from the Government - rising to £500 for those from less well-off families.

Parents must then invest the voucher on the child's behalf in a tax-free account and can top this up with an extra £1,200 a year. The Government makes an extra contribution when the child is seven, but the beneficiaries cannot get their hands on the cash until they are 18.

On a brighter note, Revenue & Customs reports that three-quarters of the earliest vouchers issued to parents - for children born between 1 September 2002 and 6 April 2005 - have now been invested.

Endowments: Challenge to 'time barring'

A legal challenge could be made to the rules surrounding the "time barring" of compensation claims for mis-sold endowment policies.

Brunel Franklin, a company that handles endowment claims on behalf of consumers, has written to the Financial Ombudsman Service (FOS) and City regulator the Financial Services Authority (FSA) asking that the rules be "amended" for those policyholders who have been time-barred, unwittingly or otherwise, from making a claim.

In essence, it wants the FSA to "make it clear that customers who have taken out endowment mortgages on the basis of negligent advice cannot be time-barred unless it is shown that they knew, or could reasonably have discovered, that there was a possibility their policy was mis-sold to them at the outset".

At the moment, consumers have to make a complaint within three years of receiving their first warning letter that their policy might not pay off the mortgage because of a shortfall in investment returns.

But what exactly qualifies as a warning letter is at the heart of Brunel Franklin's campaign. In many cases, consumers didn't realise that letters from their endowment provider constituted warnings, and have missed their deadline.

If the existing rules aren't reinterpreted, the company says it will consider a legal challenge in the courts.

Both the FSA and FOS said that they would consider Brunel Franklin's letter and respond in due course.