Last summer the Office of Fair Trading warned the credit card industry that its penalty charges were excessive and had to be reduced. The industry largely ignored the warning so now the OFT is to force massive reductions - by up to 40%.

Later this month, the OFT is expected to announce maximum levels for the charges the providers impose on those clients who breach their credit limits, who pay late or whose cheques bounce. Rumours indicate that the cap will be around £15, perhaps lower, in comparison with the £20-£25 level so common within the industry.

This action follows an inquiry initiated by the OFT last summer. Eight of the largest credit card companies were asked to respond to the OFT’s provisional view that charges were at unfair levels and invited the companies to respond with data that would justify the fees they charged. Clearly, their responses failed to impress! It is known that HSBC, Lloyds TSB, Barclaycard, The Royal Bank of Scotland and Egg all argued that their penalties were justified by the costs incurred but their information couldn’t have been sufficiently compelling!

The consumer body “Which” is firmly on the side of the OFT. Their spokesman said, “We believe that bank and building society charges should be fair, reasonable and transparent, yet every year they make £3billion from these charges, which we consider to be disproportionate to the true cost”.

We agree. Just think – by dragging their feet for six months on this issue, the industry could easily have made £600 million more profit than the OFT thinks is truly justified. We say to the OFT, get tough and demand immediate action. Don’t give the banks etc months to put their act in order – that just lets them line their pockets for a little longer but even in a short time the excess profits they generate can be enormous.

Get your skates on OFT!

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