Credit Card Charges

Credit Card Charges were investigated by the Office of Fair Trading (OFT) in 2006 and were deemed to be excessive and a threshold of £12.00 was set.  The investigation took an estimated 18 months, which gave all credit card providers the opportunity to cut the extortionate fees or risk a full scale investigation, including the chance that the lenders may have to reveal their true costs in Court. 

Credit Card Charges historically had been set at levels where they could be argued that they did indeed reflect the costs associated with recovering the costs of the default, whether a late payment fee or overlimit charge.  The natural evolution of any businesses and new CEO’s in the banks looked for ways to increase profits easily – a simple remedy was to increase charges periodically – from £10.00 to £15.00. The following year the default charges from £15.00 to £20.00, 9 months later they were then hiked up from £20.00 to £25.00. 

This clearly demonstrates that the banks are using a ‘penalty charge’ as a revenue stream rather than a way of recovering their costs of a borrowers default.

Late payment penalties have been continually attacked by consumer groups are thought to earn the banks around £400m in profit every year.

An example of the previous charges applied before the OFT Investigation

The OFT said the fees which have plunged millions of families into debt are ‘disproportionately high’.  The late payment charges (which are also known as default charges) should be cut to £12.00.  This was accepted by the banking community and the charges were slashed

Your rights

When you take out a credit card, you are entering into a contract.  Breaching that contract by late payment or exceeding credit limits is known as liquidated damages and the courts can enforce payment.  However, the sum of the charge must reflect the actual costs incurred or the default and not exceed the damages the bank has suffered as a result of the breach, otherwise this is classed as a penalty, which isn’t enforceable by the courts.

The argument that the charges exceed the customers losses are not enforceable by law is covered in the Unfair Contract Terms in Consumer Contracts Regulation 19999, Unfair Contract Terms Act 1977 and at Common Law.  Some banks argue that these charges are a fee for a service, however if this is the case then they must be reasonable under S.15 of the Supply of Goods and Services Act 1982.
Average Refunds per credit card as we stand are £590.00!  If you have had a couple of cards you could be owed thousands of pounds.  Below are some offers and testimonials from our clients, that have received refunds on their cards