OFT Press Release

[Bookworm]

Basically, the OFT were giving their conclusions to their ongoing inquest into credit cards.

And they indicated the £12 cap.

Then, as an afterthought, it seems to me, they added that it would be the same for other types of account. But of course, by then, the question arises of multiple charges, which, as their first target was c/c, they haven't really thought about, and so, as yet, there's no answer.

 

Yes, you'd think they'd be better prepared, yes, there's still a lot of work to do, no, we certainly can't be thinking of retiring just yet .

[JamesBooker]

Five News are leading on the OFT announcement in their news at 1730.

[jannercobbler]

OFT cracks down on card charges

 

Late repayment of credit card debt is the main cause of penalties

Charges for failing to make the minimum payment on a credit card bill on time are too high, the Office of Fair Trading (OFT) has said.

A default charge, as it is called, of more than £12 will be considered unfair, the OFT said.

 

The OFT added it wanted firms to recalculate their charges and only under "exceptional" circumstances would a charge in excess of £12 be allowed.

 

Consumers pay more than £300m a year in "unlawful" charges, the OFT added.

 

 

Full story Here http://news.bbc.co.uk/1/hi/business/4878798.stm

[Spiceskull]

Notice how all the TV/Radio coverage today has not made a single mention of either Bank Action Group, Bank Charges Hell or any other consumer action groups? Maybe the banks had a whisper in the OFTs shell-like.

[lookinforinfo]

Methinks the moderators are a touch pessimistic.

The Office of Fair Trade has finally nailed the lie. Not a consumer group with a vested interest, but a Government Department, has pointed out to the Courts and everyone else that banks have consistently fleeced their own customers. And even worse, it is their most vulnerable customers they have ripped off.

 

The banks have insisted that the charges reflect the actual costs involved, but

the OFT have refuted this in spades. They have admitted that the banks are greedy

liars, which can only strengthen our cases in Court.

 

We were never going to get the OFT to come up with something like the true cost-

especially as the Government owes the banks £24 million but to besmirch their

reputations as much as they have, makes it doubly difficult for them to defend any future litigation.

 

Incidentally, I see that the BBC are asking for people who have been hit by the banks to contact them. Those who have had their benefits decimated by bank

charges would perhaps get especial pleasure in piling on pressure and opprobrium

[there's a good word] on the banks.

 

BBC Article

 

Locking horns with a firm or government agency? Got a personal finance or consumer affairs problem?

Send your story to our team of journalists, and we will investigate.

E-mail us on newsonline.business@bbc.co.uk

Subject field must say BBC Your Money

Please supply daytime contact number

[sazz]

Point 1.16...

 

'We can accept, within reason, the use of graduated charges....'

 

This seems a bit sinister. We can be charged say, £3 for the first bounced cheque, then they decide £10 for a bounced DD and so on and so on... Still causing a snowball effect in my opinion!

[Spiceskull]

They have admitted that the banks are greedy liars, which can only strengthen our cases in Court.

I think people need to be mindful of how they 'quote' statements from organisations such as OFT.

 

Don't forget, this is only a press release, not the full report. The reports themselves available for download on the OFT site, and I think that this is what we need to look at before giving a final verdict on whether the OFT is on the side of the consumer or not.

 

http://www.oft.gov.uk/News/Press+releases/2006/68-06.htm

[Spiceskull]

Text from within one of the OFT reports - Action On Charges:

What costs were in the reasonable contemplation of the consumer would be a question for the court to decide. We think that in general terms a default charge may include postage and stationery costs, and also a proportionate share of the costs of employing staff and of maintaining premises and IT systems in order to deal with defaults of the same kind. The precise level of any particular fair default fee, however, would depend on the business circumstances of the particular credit card issuer.

 

Please be aware that only a court can decide whether a term is unfair and what is stated here is just our view.

We are not suggesting that default fees should be set at £12, and a court will certainly not consider that a default fee is fair just because it is below the threshold.

[martinwhite]

What costs were in the reasonable contemplation of the consumer would be a question for the court to decide. We think that in general terms a default charge may include postage and stationery costs, and also a proportionate share of the costs of employing staff and of maintaining premises and IT systems in order to deal with defaults of the same kind. The precise level of any particular fair default fee, however, would depend on the business circumstances of the particular credit card issuer.

 

Please be aware that only a court can decide whether a term is unfair and what is stated here is just our view.

 

We have always debated whether or not such "pooled" costs can be a legitimate part of the charge. It seems to me that the OFT has decided that they can. Any comments on this section?

 

We're no longer, apparently, dealing with the costs of our *own* breaches, now we are paying proportionately (hopefully) for the whole system. However, when you consider how many individual items there are, the cost should still be minimal and should not increase the charge by much, certainly not even to £12.

[Spiceskull]

I think that what the OFT is really saying is that it does not, or will not, understand what the real issues are, and that if people want to get their money back then they have to go to court...at the end of the day nothing has changed much, except for the mention of £12 which has left the banks with egg on their face...

[Neo]

But come on, how much of their systems are specifically for charges? As an IT Consultant, I am sure these banking systems are there mainly to run the whole bank and they would be there anyway - charges or not. The "applying charges" part is a negligible cost in relation to the big picture - so I doubt they would prove that any cost could be assigned to infrastructure, etc.

 

Back to the same argument... can they/will they be able to prove their true costs

[fallen404]

Surely with the whole cost thing, the bank will have to justify their expenses. Thing is, if you're sending out standard letters to lots of different people, you can get large (as in about 2.5m end to end) printer/sorter/envelope-stuffer sealer devices, that will do pretty much all the work for you. So all they could really justify would be the cost of the stationery and prepaid envelopes (which would be very low per charge, since they must use one hell of a lot of both) plus the cost of maintaining the computer(s) that issue the charges, and (presumably) the cost of the poor mailroom clerk who has to carry the sacks of penalty letters down to the post office or wherever they're collected from.

 

Mind you, if the big multifunction mailer device is anything like the one I had to use once, then they'd also need to employ someone to watch it all day and unjam it every 10 minutes when it hiccups.

[lookinforinfo]

Let me try again.

The banks parrot the same line -that their charges are a reflection of the costs they incur on handling credit card holders who are in breach of the T&C's.

However when one reads

OFT 842

1.6 "On the analysis we have undertaken we have concluded that generally credit card default fees have been set AT A SIGNIFICANTLY HIGHER LEVEL THAN IS FAIR for the purposes of the UTCCRs.

 

5.1 "It is clear to us from our enquiries that in many cases credit card default

charges currently in force ARE UNFAIRLY HIGH.

 

They are serious indictments of bank practice from a Government Department

and send a strong message to the Courts and all those who have bank accounts.

And if you read between the lines you will see that the OFT is saying that they believe the actual cost is less than £12 but is a start in the right direction.

 

So, the banks say they are not overcharging, the OFT says they are significantly overcharging. Therefore implicit in the OFT report is that the banks are lying and

greedy to boot.

OFT 842 5.12 "Nevertheless, in view of consumer detriment involved

in the imposition of UNLAWFUL DEFAULT CHARGES, we consider the steps to reduce

charges should be taken as a matter of EXCEPTIONAL PRIORITY"........... #

 

 

 

" UNLAWFUL DEFAULT CHARGES"

 

The banks do not have a leg to stand on.

As I said in my earlier post we have to overlook the £12 figure and look at what the OFT actually said. It is utterly damning.

And it gets worse. Because the banks have known all along that the charges were punitive -designed to send a message to us not to repeat our error. Once they

realised that certain customers were having financial problems they should then

have stopped the punishment. That they did not is a disgrace.

[norvernrob]

On the subject of actual costs to the bank, i stopped my paper statements a couple of years ago, so when i am charged now i don't even recieve a letter, it's just flagged up on my internet banking.

 

I would estimate the actual cost to the bank of me going overdrawn is zero.

[cakey]

Exactly, my bank send me statements but they do not send me any letters to tell me of charges (they wrote to me to tell me that) therefore £12 does not cover the cost of a letter, so its simply covering the cost of a pre installed computer system that is set up to run all of their banking operations. The cost of computer installations divided by all of the charges for everyone who banks with them does not amount to £12 in my thinking.

[Barry031261]

I think when the OFT investigated Credit Cards they failed to realise that most, if not all, credit card accounts do not receive letters of charges at all.

The charges are simply added to the account by computer therefore involving zero cost to the banks.

How they arrived at £12.00 is beyond me.

But, as I read earlier, the Law remains the same and the Banks will need to justify their charges in Court for it to stand. And they won't do that, will they?

 

Baz

[dave]

In short, all the OFT said was that if a bank/cc company charged more than £12 then that is the point at which they would take legal action.

 

They also said that this does not mean that any amount under £12 is fair either - or if it's over £12.

[Guest stephen]

Latest responce to questions I put to the OFT,

 

The £12 threshold is purely an administrative figure which OFT has said it

will apply to credit card default charges. We have not said the figure should

apply to other areas of the industry, rather that the statement of principles

about the calculations of the level of the charges should. Different

business models and operations will have different costs but the principles

will still apply.

 

Paragraph 5.14 of our statement refers:

 

"Implications for other standard default charges to consumers

5.14 The broad principles set out in this statement are likely to be relevant

to other default charges in standard agreements with consumers, such as those

for mortgages, store cards and bank accounts. We expect the banks and other

finance businesses to consider the wider implications of these principles, and

to bring any similar charges they impose for breach of contract into line with

them, where and as appropriate bearing in mind the different legal and

practical contexts in which they operate. If appropriate steps are not taken

within a reasonable timescale, further regulatory investigation of the

position can be expected."

 

As we have also stated this document is a statement of the OFT's position and

not a definitive statement of the law. Only a court may determine if a charge

is unfair in relation to the UTCCRS. Should the OFT decide in the future to

litigate on this issue, and this has not been ruled out, any changes made as a

result of the statement of our position or as a result of any proposed

injunction will be forward looking. This does not preclude individuals from

seeking their own redress and advice about retrospectivity.

[skyrocket123]

How will this affect claims being made now for past charges? Do you think that banks will try and split the difference?

Sky

[dave]

It won't matter if they do.

 

A charge of less than 12 quid is still punitive, as it's more than the breach costs the bank.

[Spiceskull]

At last - a sort of half-hearted mention in today's Private Eye - scanned and emailed to admin@bag

[Bookworm]

How about a copy to research@? Pwetty pwease?

[Spiceskull]

How about a copy to research@? Pwetty pwease?

God - I am such a plonker...coming up!

[banks war on poor]

Noite this extract from my calaim letter to barclaycard, especially clause 3:17 & 3:18 talking about double charging. No-one seems to have picked up on this very powerful argument.

 

That is that the credit card companies are charging HIGHER interest rates to people they believe will be a higher risk and incurr charges for default. Then charging those same people penalty fees for default in addition to the risk premium on the interest !

 

I would love to hear that debated in a court of law !

 

{I draw your attention to the following quotes taken from clauses contained within the OFT ruling.

 

Clause 1.11 - “ The setting of a £12.00 threshold is a provisional measure to move credit card companies towards compliance. We are not proposing that default fees should be equivalent to the £12.00 threshold and a court will not consider that a default fee is fair just because it is below the threshold.”

 

Clause 3.8 - “ We have difficulty in seeing any general damages that could flow from exceeding a credit limit of a credit card agreement.”

 

Clause: 3.9- “ In general a party to an agreement who fails to pay an amount due is not usually liable to pay ANY damages to the creditor except such interest as may be payable.” ( this interest having been already been paid to Barclaycard out of my account.)

 

Clause: 3.17 - “ In considering costs arising from default, a credit card company should be careful to avoid any benefits arising from a ‘Double Recovery’..

 

Clause: 3.18 - “These benefits may arise out of operating a risk based pricing policy, that is offering a higher APR to a particular class of consumer based on evaluation of their credit risk.”

 

My card agreement was at your highest APR ( 27.9% ) so it seems that you have already built in a higher profit margin on my account to cover any possible default charges. So you are possibly in effect charging twice for the same items.}

[Maxie]

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