Is the punishment due for penalty chargers?

Most Britons do not find it easy to get back into the daily routine after a holiday away. Working your way through unpaid bills that have accumulated while you were on holiday is frustrating. Opening a credit card statement and discovering that you face a £25 penalty fine for not paying on time is infuriating.

Credit card companies are continuing to punish late-payers with fines which are typically between £25 and £20. But the slick plastic operators are standing on increasingly slippery ground. The Office of Fair Trading (OFT) last month ruled that credit card penalty fees are excessive — any fees above £12 are judged “unfair” by the consumer watchdog.

Behind the scenes, lawyers at the nation’s leading credit card companies fear a legal ruling against the industry which would allow credit card customers to make retrospective legal claims against card companies — on the grounds that the penalty charges that they incurred in the past were unfair. These claims could stretch back six months before a definitive ruling, forcing card companies to reduce their fees.

If you returned from a Spring break to find that you have been hit with a credit card penalty fee, you may be able to make a legal claim for the fee to be withdrawn in the future. Credit card companies have until May 31 to respond to the OFT’s ruling.

While not being drawn on whether claims can be made retrospectively, a spokeswoman for the consumer watchdog admits: “There is the potential for court claims (made by credit card customers).” If credit card companies do face a flood of retrospective legal claims, revenge could be sweet for their customers.

For advice on how to reclaim penalty chrages click here

Have your say on credit card charges using the form below.

Comments

[Johanna]

Last February I was charged £35 by Abbey for not having sufficient funds in my current account to meet a cheque for £945.73. This is a direct debit which is debited from my account three times a year to meet University accommodation costs for my son. When they notified me of this I immediately transferred the monies from my internet account with them and called into the branch. The Manager refused to cancel this charge as she said the fault was mine that the funds were transferred too late to meet the cheque. She also reminded me that they only allow a refund of charges once and that I had been refunded a £30 charge in June 2005 for insufficient funds. Again there was more than enough in the Internet Account at that time and the monies were transferred immediately to the current account.

I feel that this charge is very unfair and far too much bearing in mind that I had more than enough in the Internet account to cover the amount.

[david barraclough]

I have just been hit with a £25 penalty by TSB. I cannot understand the logic of these penalties. They are making money from me on the interest rate alone. It's even more annoying as this is a rare event and I always pay more back than is required each month so I am always 'not in deficit' so to speak. I cleared the whole balance in anger and will consider not now using the card. The following day I discovered that the TSB instead of managing a quarterley Direct Debit had been paying it monthly leaving me many hundreds of pounds out of pocket over the year cycle. Now how much d'you think I should fine them for this negligence ?

[Brian Marsden]

The simplest way to avoid punitive late payment charges is to set up a direct debit to pay at least the minimum amount (and preferably the entire balance) automatically. Of course, as Joanna found to her cost, you must have sufficient funds to cover the direct debit - and watch your current account balance like a hawk.

More pernicious - and harder to avoid - are charges for exceeding your credit limit (there was a time when they just increased it for you). It can be hard to keep track of how close you are to the credit limit, especially if there is more than one card holder. (To be fair, my card issuer just declined the transaction when the credit limit would have been breached, rather than accepting it and "fining" me. My wife was really pleased when the Tesco checkout girl told her that her card had been refused...) What is so sacrasanct about the credit limit anyway? I often have mine increased without asking.

i had a virgin creditcard and was still in the 9month interest free introductory offer when i paid 1 day late and received a £25 charge and lost my interest free period. when i contacted them they were happy to refund the £25 but the remainder of the 9 month offer was at 6.9%. i therefore transfered my balance to egg for my 5 month anniversary offer. a few weeks later a letter from virgin told me my new interest rate would be 25.9% when my intro offer ended. i rang to ask why so high and was told they didn't know but could offer me a rate of 12.8 if i paid a £25 fee. this appears to me a way of making £25 out of people and a con. by this time i owed them nothing, but people with a balance would have had no choice but to pay to get the lower rate. i closed the account

[David Wright]

If David Barraclough is so incompetent managing his money that he does not see an incorrect direct debit running into "hundreds of pounds" for a year I salute TSB for giving him a wake-up call. I am sick of hearing about these poor dears who don`t appear to have the sense to set up a direct debit to make the minimum payment each month on each of their credit cards to avoid late payment penalties. It`s not rocket science. Lower penalty charges will mean the organised subsidising the feckless. Not that that`s anything new in our `nanny state`.

[Paul Burnell]

Oh dear yet another person too idle to check bank balances. The BANK paid my quarterly DDM monthly. Oh no it did not, the company you signed the DDM for took the money from your account. The bank do NOT pay DDM's they pay standing orders.

Can you also imagine the outrage if a bank took money from an interest bearing account to pay a bill through a non interest bearing account, as some bright spark sugested. Just imagine all the " you have no right" to take my money from that account brigade.

All most of these comments prove is that some people can not manage money and seek to blame anyone else but themselves for mistakes.

If you can not manage to pay credit card bills on time do not have them. My bill has arrived today,well in advance telling me to pay before a set date. I have just spent two minutes paying it online, moving money from my savings account to do so. What hard work that was !!

[abharrisson]

There are two sides to this. People who cannot manage their money deserve to have penalty charges. Banks are here to make money they are not a charity and their terms are more than clear. Secondly however Banks are not allowed to "make" money out of penalty charges, the law says they should reflect the cost of the action concerned. I can quite clearly tell you that despite numerous investigations Banks DO make money out of penalty charges and budget to do so. This is quite clearly against the law but so far has proved an unbreakable cartel... I know because I used to work at a high level within a UK bank running their credit card division.

[Trevor Freeman]

My experience of one credit card (CC) company follows thus. An existing CC company decided to sell the card business that included my account to another card company. After due thought I decided that I did not wish to transfer and so paid off the balance and destroyed the card. So a nil balance was transferred. The new CC company decided to send me a new card and told me the procedure to go through to activate it which I declned to do. So I was in possession of a non active card with no balance outstanding. I then get a £25 penalty charge from the new company because I was late paying the balance to the old company. I disputed this as I informed them that I did not wish to be a customer of theirs and as such had not signed the agreement to activate an account with them. Their answer was to levy another £25 fine because they said I was now another month late. And thus it continued. I phoned to speak to someone and was told that the number and address supplied on the statement were not valid for complaints and that I had to write to another address which was not on the statement. At this point I gave up in frustration, and the fines continued to accumulate. I then phoned again and tried to register a complaint, the outcome was the same. But this time I advised that the authorities in the guise of the OFT were not very happy and had told the CC companies to clean up there act otherwise action would follow. The person I was speaking to told me I was wrong and that there was no such advice given to the CC companies and that I must pay the fines outstanding as they were due under the contract I had agreed to with the previous company. By now the fines had reached £125. And thus the saga continues.

[David Wright]

Dear God! Yet another financial incompetent whining in the Money section of the Times today.(June 10)Su Williams complains that Tesco `fined`(her word) her for not making a payment at the correct time. That is the deal she signed up to so she should remember to keep her side of the deal.Now that some banks have reduced penalty charges it is only a matter of time before interest rates for all card users go up.Perhaps then the nannies at the Consumers Association will keep quiet-but I won`t hold my breath.

[Ian Whittaker]

The comments some people have made about "incompetent money management" are ridiculuos abd another issue entirely.
The simple fact is the financial institutions have knowingly being exploiting consumer ignorance and fraudulently extorting money from them for years.

[tv bracket]

Actually I am ok with initial consumer screening process and fees for late charges. It should be intended to force and teach a lesson for consumer with lack of money discipline (hopefully). I am more interested to the issue of limiting the interest rates, because it is the most part that causes people to drown helplessly.