May 31, 2006

By Peter Kenny

Three main UK banks, HSBC, Lloyds TSB and Barclays, today announced that they are to cut their existing penalty charges for.

In April The Office of Fair Trading (OFT) concluded that the penalty fees charged by credit card companies and banks were excessive and were told that an appropriate fee would be £12 per item instead of the £20 - £25 per item currently charged.

The OFT had given the banks until Wednesday to respond to their report.

Barclaycard currently charges £20 for unauthorised overdrafts, bounced cheques or late payments and have indicated that they will reduce this charge to £12 from August 1st 2006. Lloyds TSB and HSBC have said they will reduce their charges to £12 from June 28th 2006.

The Royal Bank Of Scotland, the UK’s largest bank, said it had responded to the OFT and would be continuing discussions.

The OFT cannot impose a fee cap, however, if banks and credit card companies do not adjust their fees the OFT could and would take legal action. The OFT, said that the excessive late payment penalties, amounting to £300 million annually, were unlawful.

Even though Barclaycard has announced they are to reduce their penalty charge to £12 they also indicated that because of the reduction they will increase the interest charge for credit card cash advances from August 1st 2006.