OFT Decision on Late Payments
The Office of Fair Trading limits late payment charges to £12
5th April 2006
The Office of Fair Trading (OFT) has announced that it is to limit the charges credit card companies make for a late payment being made to the account.
The average such charge is around £25, and it was widely thought that the OFT had decided to cap it at £15 following an investigation in 2005.
In the event, the OFT went further than expected, by declaring that any charge larger than £12 would be considered 'unfair' and could be challenged in the courts. Only under 'exceptional' circumstances could the charge be higher than this, the OFT said.
The resoning behind the OFT's decision is that, legally, late payment charges can only reflect the admin costs to the card issuer, and not include any element of punishment or penalty. The OFT estimates that the punitive element of current charges amounts to £300m annually, an allegation that the credit card companies hotly deny.
The OFT has given the credit card industry until the end of May to respond.
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