One missed credit card payment, or going overdrawn without permission, and suddenly a £30 charge can be incurred. Bank charges can seem to be unfair and too harsh given the frequently tiny amounts of unauthorized borrowing involved. Now it seems that the law could be in agreement. Following on from an investigation launched in October 2003, eight major credit card companies were told in July 05 by the Office of Fair Trading (OFT) that the charges they levy for late payments were "disproportionately high", and that charges needed to be adjusted to better reflect the costs to them of managing late payment. Throughout the investigation, the credit card firms continued to maintain that the late payment charges they imposed were fair. The legality of these charges are being questioned by a Scottish law firm, supported by the Scottish Citizens Advice, who are encouraging consumers to challenge the right of banks to charge such high penalty fees. With current high street credit card typical APRs ranging from 5.9% to 29.9% (source Credit card comparisons ) this is up to 25.4% points above the present 4.5% Bank of England base rate, and banks cutting the interest rates on current and savings accounts information, many consumers see the levels of the bank charges as an additional means of revenue generation by the banks through excessive penalization of consumers beyond the actual costs involved. "The law says if someone breaches their contract, for example you go over your overdraft without permission, the bank's only entitled to recover its actual loss," Mike Dailly, Principal Solicitor at the Govan Law Centre told BBC Money Box, "If you get an automated letter from your bank for going over your limit, that costs about 50p. So why should someone get a £36 letter for that transaction?". In a previous press release, the OFT stated that it, "considers that, in a consumer contract, a default charge is likely to be disproportionately

high if it is more than a genuine pre-estimate of the damages that the card issuer would win in court if it sued the cardholder for breach of contract.” A representative of the British Banker's Association told the BBC that the banks were not charging customers more than the actual cost, citing that the charges were to cover additional costs incurred due to a need for human intervention, "to extract the item from the day's work, to research the customer's recent credit profile, and then a managerial decision as to whether to return the unpaid item.” The Glasgow based Law firm states that, "The legality of bank charges has yet to be ruled on by a senior UK court but these will not be enforced if they are found to be 'penalty' or 'unfair' charges.” Until a final ruling is made by the courts, they have drawn up a letter citing both Scottish and English case law along with the regulations which apply throughout the UK to help customers get their charges refunded. Disclaimer: All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986. You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts. Useful resources: Credit card rate comparisons Current and savings account interest rate cuts further information

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