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‘Unfair’ Penalties Fees Charges & Payment Protection 2006-08-26

Posted by clype in Articles of Interest, Money, Statistics.
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Credit card firms have cut ‘unfair’ penalty fees to 12 GBP — or less — following a ruling earlier this year by regulators.

Almost 40 of Britain’s main credit providers, from high street banks such as ‘Barclays’ to US American card-issuers such as ‘MBNA’, have cut their default fees after ‘The Office of Fair Trading’ (‘The OFT’) deemed figures of 25 GBP or more ‘excessive’ earlier this year 2006.

  • But experts warned many credit card firms were increasing charges elsewhere, and warned consumers to be on the lookout for new hidden costs.

‘The OFT’ is expected to issue a statement within weeks confirming all the main card issuers have reduced their fees voluntarily following its warning in 2006-03. It is also expected to insist that the cap is extended to bank account agreements such as overdrafts and default charges.

Ms.Samantha Owens, of research organisation ‘Moneyfacts’, said:

‘All the card issuers we are aware of have cut their fees to 12 GBP since “The OFT” warning, thereby avoiding the need for follow-up action.

‘The only exception is “Egg”, which has explained to “The OFT” that it has a more responsible lending structure than other issuers and consequently charges 16 GBP.

‘While it is good news that the charges have come down voluntarily, we have noticed other charges being introduced such as fees for duplicate statements and for changing the date of monthly payments.

‘These services used to be free, and it is possible more new costs will creep in as firms make up for the money they have lost on default charges.’

The concessions on credit cards are estimated to cost the industry about 300 million GBP/year in lost profits. Ms.Owens added:

‘It seems that while the charges have gone down for consumers who do not keep on top of their payments, the costs for everyone else will go up. Services we have grown used to, such as free direct debits, might become chargeable in the future.

‘We would advise consumers to keep an eye on their statements, where any changes to the terms and conditions should be clearly displayed.’

A spokesman for ‘The OFT’ said it and ‘The Financial Services Authority’ had been considering the next step forward in relation to bank account default charges. It said a statement would be published ‘within weeks’.

  • Meanwhile, banks yesterday met ‘The OFT’ to discuss the regulator’s findings on payment protection insurance.

Earlier this month, the regulator suggested banks were offsetting low profit margins on unsecured loans by selling expensive Payment Protection Insurance (PPI).

It is investigating the 5 400 million GBP/year PPI industry amid complaints that consumers are being ripped off and missold complex financial products.

‘The OFT’ is still carrying out a study of the market and has not yet made any decision about the case.

PPI policies are usually sold to consumers at the same time that they take out loans or mortgages. They are designed to safeguard borrowers’ repayments should they lose their jobs or become too ill to work.

The PPI investigation stems from a super-complaint submitted to ‘The OFT’ last year by ‘Citizens Advice’, the consumer group.

‘The OFT’ found that PPI customers had a much lower rate of successful claims than consumers taking out other types of insurance.

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