February 21, 2006

Credit card companies are coming under increased pressure to reduce their late penalty fees.

The Office of Fair Trading has been considering taking action to force credit card companies to cap their late payment charges from £25 to £15. They see the current £25 fee as excessive. The current fee is higher than the penalty a court would impose if the lender sued the creditor.

The fee is applied to consumers who pay their minimum payment late, send cheques for payment that later bounce or who exceed their agreed credit limit.

It is thought that if the Office for Fair Trading (OFT) get their way it will cost credit card companies and banks over £400 million a year.

The OFT may wait until the banks publish their latest accounts, which are due this week. Barclays have just announced that their profits have risen to £687 million, an increase of 15%. Barclays who produce the credit card Barclaycard have admitted in the past that consumers failing to pay their bills on time thus increasing bad debt have hit their profits.

Any action taken by the Office for Fair Trading will be watched closely by consumer bodies who continually call for credit companies and banks to reduce the default charges and fees.