The OFT announcement means that fees for late payment of credit card bills, bank overdrafts or mortgages must not be set at a punitive level by banks, and can only be priced to recover the costs legitimately involved. Specifically, it said that charges of over £12.00 for late payment of a credit card bill could be deemed unlawful.
Cases seen by Citizens Advice Bureaux have included:
A Suffolk woman in receipt of benefits totaling £65.52 per week, who had no money to live on for a fortnight because of bank charges. She had set up an account to pay four monthly direct debits of about £5 to £10 each. On four occasions she did not have sufficient funds to cover the direct debit, and she was charged £32 for each npaid direct debit - a total of £128. The bank deducted two whole weeks benefit to cover these charges, as the cash went into her account.
A Sussex woman on Income Support was charged £20 for making a payment to her storecard that was one day late. She was then charged another £20 for going 65p over her credit limit. This was at a time when she was paying off her existing balance at a rate of £29 per month, and the charges meant that she was dragged further into debt.
Sue Edwards, Senior Social Policy Officer for Citizens Advice, said:
?This announcement from the OFT is excellent news for the many millions of people in the UK who pay banking charges every year.
?The Citizens Advice service helped people with 1,250,000 debt problems last year, and a large proportion of those people will have seen their debt increased by late payment charges.
?We have been particularly concerned about the magnitude of charges on basic bank accounts - which are aimed at the poorest of people. These accounts enable those who have previously had difficulty opening a bank account to take advantage of the financial incentives of paying utility bills by direct debt. However, we have found that some basic bank accounts charge as much as £39 for ?bouncing? a direct debit - which is very nearly a whole week?s money for a person under the age of 25 on Income Support.?
http://www.myvesta.org.uk
Citizens Advice Site
Read more at: http://myvesta.org.uk/blog/2006/04/citizens-advice-welcomes-oft-action-on.html.
