Email to a friend

Late Payment Fees – Customers Have a Part to Play

Andrew Hagger, head of news and press at Moneyfacts.co.uk comments on reaction from credit card operators following the OFT investigation.

“Whilst it’s good news to see the level of fees being cut by some of the biggest players in the market, namely Barclaycard, Lloyds TSB and HSBC, it will be interesting to see if the remainder of the industry comply with the OFT suggestion of a £12 cap on penalty fees. The fact that they aren’t coming out with their own proactive press releases may not be a positive sign.

“It would also be interesting to know if the impact to lenders will be as severe as some commentators have predicted, as no doubt a fair number of those £20 or £25 fees which would have increased a customer’s level of indebtedness will have ended up being written off.

“It is inevitable that lenders will look to recoup some of the revenue that will be lost, so it is no surprise to see Barclaycard reportedly raising their interest rate by up to 29.9 per cent APR for ten percent of their customer base. The increased rate for these selected customers is probably a reflection that these are the accounts that are showing ‘higher risk’ characteristics to the lender. It was interesting however that, in March this year, the Competition Commission considered that store card rates over 25 per cent were too high.

“One thing that we shouldn’t lose sight of here is that, rather than continually blaming the lenders, it is down to consumers to manage their accounts within their agreed credit card limits. Customers shouldn’t just bury their heads in the sand if they find themselves in financial difficulties. They should pick up the phone and speak to their card provider, as doing nothing can soon see the number of fees pile up and make their financial position far worse.

“To avoid having to pay these penalty fees, the simple answer is to set up a direct debit for the minimum monthly payment, and to communicate with your lender if you think your account is likely to exceed your credit limit.”