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Watchdog slams 'unfair' credit card charges

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    Unfair credit card charges have cost customers more than £300 million a year, the Office of Fair Trading (OFT) has said.
    Credit card charges for missing or late payments, or for going over credit limits, have generally been set at "a significantly higher level than is legally fair", said the watchdog, leading to unlawful penalty charges adding up to more than £300 million. The watchdog has told credit card issuers that they must recalculate their default charges and reduce the level of charges where necessary. Any fees over the £12 threshold would be considered unfair and would be challenged, it said.
    "Our statement of principles provides practical guidance to banks which increases their incentives to compete vigorously while protecting consumers from being charged unfair amounts," said OFT chief executive, John Fingleton.
    "We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively."
    Charges should not be larger than the card issuer's likely administrative costs for dealing with defaults, said the OFT and it would be unfair if consumers had to pay more than a court would order them to pay if they were sued for breach of contract. With figures from charity Credit Action showing that UK debt grew at a rate of 10.3 per cent in the past year, those who can't afford credit card repayments and incur default charges may get into further financial difficulties and ultimately risk damaging their credit rating.
    The credit card industry has until May 31st to respond to the OFTs statement.




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