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.
Title: Unfair Bank and Credit Card Charges Under Scrutiny
Summary:
The Scottish Citizens Advice Bureau, in collaboration with a Glasgow law firm, challenges disproportionate bank account and credit card fees as potentially unlawful.
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Article Body:
Unexpected fees from missed credit card payments or unauthorized overdrafting can often result in charges as high as £30. These penalties appear severe and unfair given the minor nature of the infractions. New investigations suggest that the law might agree with this perspective.
In October 2003, an investigation began, leading the Office of Fair Trading (OFT) in July 2005 to criticize eight major credit card companies for imposing "disproportionately high" late payment fees. The OFT urged these companies to adjust their charges to more accurately reflect their actual costs. Despite this, credit card providers have defended their charges as reasonable.
Concerns about the legality of these charges are being raised by a Scottish law firm, supported by the Scottish Citizens Advice. They are advocating for consumers to dispute the banks’ right to levy such excessive fees. With current APRs on high street credit cards ranging from 5.9% to 29.9%, and considering the Bank of England's base rate is only 4.5%, many consumers view these charges as a means for banks to profit excessively, punishing customers beyond the actual costs incurred.
According to Mike Dailly, Principal Solicitor at the Govan Law Centre, "The law states that if a contract is breached, such as overdrawing without permission, banks are only entitled to recover their actual losses. An automated letter may cost about 50p, so why charge £36 for it?"
The OFT previously indicated that in consumer contracts, a default charge is deemed excessively high if it surpasses a genuine estimate of damages the card issuer could claim in court for contract breaches.
A British Bankers' Association representative told the BBC that customer charges are based on actual costs, including human intervention and managerial decisions required to manage unpaid items.
The Glasgow law firm highlights that UK courts have not yet ruled on these bank charges' legality. However, if deemed 'penalty' or 'unfair,' they cannot be enforced. Meanwhile, they have prepared a letter citing Scottish and English case law to assist customers in reclaiming undue charges.
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Disclaimer:
The information provided is for general use only and should not be considered financial advice. Professional advice is recommended before entering into any contractual agreements.
Useful Resources:
- [Credit Card Rate Comparisons](http://www.moneynet.co.uk/credit-card/index.shtml)
- [Current and Savings Account Interest Rate Cuts](http://news.ft.com/cms/s/faed1a82-8e9c-11da-b752-0000779e2340.html)
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About the Author:
Michael Hanna is a passionate writer and internet marketer residing in Scotland.
Contact Information:
- Email: samqam@googlemail.com
- Phone: 0131 561 2251
- Website: Taxi Belfast
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