Excessive Bank Account And Credit Card Charges Attacked As Unfair And Possibly Illegal
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Unfair and Possibly Illegal Bank and Credit Card Charges Under Scrutiny
Summary
Missing a credit card payment or accidentally going over your bank account limit can result in a hefty £30 charge, despite the minor nature of the infraction. Many believe these charges are excessive and unfair, and the law might agree.
Investigation and Findings
Since October 2003, the Office of Fair Trading (OFT) has been investigating. By July 2005, their findings indicated that eight major credit card companies were imposing unfairly high late payment fees. Despite resistance from these companies, the OFT insisted that charges should better reflect the actual costs incurred in managing late payments.
Legal Challenges
A Scottish law firm, backed by the Scottish Citizens Advice, is challenging the legality of these charges. They encourage consumers to question the banks' right to impose such steep penalties. With credit card APRs ranging from 5.9% to 29.9%, significantly above the Bank of England's 4.5% base rate, many see these charges as a way for banks to unjustly profit.
Mike Dailly, Principal Solicitor at the Govan Law Centre, argues: “If you receive an automated letter for going over your limit, costing about 50p, why should you face a £36 fee?”
OFT Perspective
The OFT believes any default charge should closely reflect actual damages. It considers charges unreasonably high if they exceed a genuine estimate of potential court-awarded damages in a breach of contract case.
Banks' Defense
The British Bankers' Association claims charges reflect actual costs, including human intervention, reviewing the customer's credit profile, and managerial decisions regarding unpaid items.
Legal Implications
The legality of bank charges is yet to be fully tested in senior UK courts. However, if found to be penalties or unfair, they may not be enforceable. Until there's a definitive court ruling, the Scottish law firm has prepared a letter citing relevant case law to help customers reclaim charges.
Disclaimer
This information is for general purposes only and not to be construed as advice under the Financial Services Act 1986. Always seek professional and legal advice before entering any binding contracts.
Useful Resources
- [Credit Card Rate Comparisons](http://www.moneynet.co.uk/credit-card/index.shtml)
- [Interest Rate Cuts Information](http://news.ft.com/cms/s/faed1a82-8e9c-11da-b752-0000779e2340.html)
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