OFT to clamp down on payment charges

16 March 2006
The Office of Fair Trading (OFT) is poised to tell banks and other credit card providers they will have to cut the charges imposed for late monthly credit card payments.

The watchdog has met with the Association for Payment Clearing Services (Apacs) following an investigation that began last summer.

This originally focused only on the eight main credit card companies, but was then expanded to cover other services in the banking sector

The charges could be cut by as much 40 per cent, possibly capped at £15, which compares with fees of between £20 and £25 that are currently charged.

In addition to credit card payments, the ruling will also cover the one-off penalties for cheques that bounce and daily charges for a customer exceeding their overdraft limit.

Last year website Moneyexpert.com reported that bank charges had increased by an average 30 per cent in the last two years.

The cost of a bounced cheque had risen from £24 to £32, it said, while charges for unpaid standing orders or direct debits had risen to around £31.

The OFT's move follows a report from the competition commission that found store cards were also charging excessive levels of interest.

In some cases rates were found to be between ten and 20 per cent higher than would reflect a "reasonable" level of profit.

Card providers were therefore ordered to include a warning on statements for cards charging an APR over 25 per cent.

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