Late payment charges

geordie28

Hi all

I have a post office credit card which I used for a balance transfer. Back in February I made a large payment to clear the balance. I made an error in my calculations and still owed £12. I broke up with my partner around this time so did not get any of my post and did not know I still owed money. I have recently moved back in with my partner and discovered all my letters showing I still owe £12 and I have been getting charged £12 a month ever since. The balance is now about £90 and I will have all of these late payment charges on my credit file. Before this I never missed a payment and my credit score was very good. I rang up to explain and asked if they could be removed. The guy I spoke to offered to remove 2 months worth. I declined this as I feel the charges are too punitive.I don't have a problem with the bank and realise it is my own error but i do wonder what my rights are. Is it fair to charge this much for a small outstanding balance? of course I would have paid the £12 immediatly had a I known.
Any advice?
Many thanks

Willing2Learn

In my opinion, it is fair and reasonable charges and credit file markers. It appears from your OP, that this occurred over a few months. (How many please?) Sorry dude, I think you should just take it on the chin

Nasqueron

£12 was ruled the maximum card companies could charge their customers by the OFT in 2006 and no-one has challenged this as unfair in court. Unless you are in current financial hardship, 2 months would be a generous offer and you should have accepted it and cleared the debt.


It is not their fault you did not have a mail direct or inform them to send the letters to another address, you are reliant on a goodwill gesture by asking nicely, not arguing the charges were unfair

[Deleted User]

The charges are in the contract you signed and agreed with.

You need to pay them.

They’re now not inclined to honour any goodwill for you as you refused a previous generous offer.

geordie28

Yeah totally my fault. Thanks everyone for answering

onlyfoolsandparking

geordie28 wrote: »

Yeah totally my fault. Thanks everyone for answering

Hey mistakes happen and anyone who says they've never made a mistake has never done anything.


Learn the lesson, avoid making that particular mistake again, job done:T

chattychappy

Short answer:

I disagree with the gist of the posts so far. But challenging the £90 will be a struggle. The fact that CCs are willing to do deals in situations like this suggests to me that they know they are on dodgy ground.

Long answer:

Nasqueron wrote: »

£12 was ruled the maximum card companies could charge their customers by the OFT in 2006

Sort-of. It was common for CCs to charge as much as £30 for late payments. This was challenged by a law student who, through his studies, realised they were probably illegal under the then Unfair Terms in Consumer Contracts Regulations 1999 which held that a penalty may not exceed the cost to the injured party of the breach. The OFT (the then regulator) took up the complaint. It concluded that there was no particular figure that would be lawful. It would depend on individual circumstances. However they would presume that a standard charge of more than £12 WOULD be unfair and would cause an investigation by them. They stated that £12 should not be a de-facto charge. Lower fees could be unlawful and higher fees could be reasonable. Of course, £12 did become exactly what the OFT said it shouldn't become - a defacto standard.

Nasqueron wrote: »

no-one has challenged this as unfair in court.

I don't think it was ever ruled on by a precedent-setting court, but it is quite possible that cardholder lost/won an individual small claim.

The UTCCRs have since been replaced by the Consumer Rights Act 2015 which is written in a slightly different way:

A term is indicative of being unfair if it is a:
A term which has the object or effect of requiring a consumer who fails to fulfil his obligations under the contract to pay a disproportionately high sum in compensation.

So we have new law and new regulator, but the principle is the same.

!!! wrote: »

The charges are in the contract you signed and agreed with.

You need to pay them.

Well of course many people would have said the same back in the days of CCs charging £30 a go. Just because something is in the T+Cs doesn't make it legally enforceable. It's not the first time CCs have failed to catch up with the law. PPI is an example. Also the way we were endlessly told that CPAs couldn't be cancelled via a CC until somebody spotted the Payment Service Regs said that cardholders must be able to cancel via the CC.

Anyway, the OFT ruling was back in the days when CCs would post you a letter once you were late or even attempt to call you. There was a considerable cost to people paying late.

Given that you are charged interest which covers the lateness in making a payment, it's hard for me to see how £12 is proportionate to the cost suffered by the CCs. No doubt they suffer from bad debts and enforcement costs against SOME cardholders, but it's not clear to me that such a cross-subsidy is lawful.

The OP has an individual claim against a CC in respect of an individual contract. I would write a friendly letter to them suggesting an alternative figure - perhaps £20 in total to deal with any computer-generated letters/dealing with the query on the phone.

Failing that, I would challenge them to demonstrate how what they have charged is proportionate to the work that they have had to carry out. Draw their attention to S63(1) Consumer Rights Act 2015 and Para 6 of Schedule 2 and invite them to reconsider.

In conclusion, I agree with the OP. The charges are "too punitive". However the credit file should stand - that is simply a record of fact.

Nasqueron

£12 has been accepted as a fair charge (not challenged in any court or regulator ruling) since 2006 and OP has had these charges by not paying off the balance in full and not telling the bank they had moved to ensure letters went to the right place. Just as the 2009 case ended unfair bank charges, these card charges are fair and legitimate. You can write as much text as you like but this is the way they have been ruled.

chattychappy

Nasqueron wrote: »

£12 has been accepted as a fair charge (not challenged in any court or regulator ruling)

How do you know that no court has ruled on this? County Court Judgments are generally unrecorded.

eskbanker

chattychappy wrote: »

Anyway, the OFT ruling was back in the days when CCs would post you a letter once you were late or even attempt to call you. There was a considerable cost to people paying late.

Given that you are charged interest which covers the lateness in making a payment, it's hard for me to see how £12 is proportionate to the cost suffered by the CCs. No doubt they suffer from bad debts and enforcement costs against SOME cardholders, but it's not clear to me that such a cross-subsidy is lawful.

Section 4 of the OFT report explains their thoughts on what can and can't be included in such charges and it would seem to me that any such cross-subsidy would go completely against the OFT position, which clearly expects only reasonably direct costs to be included.

As an aside, it's perhaps worth noting that by setting an arbitrary fixed threshold of £12, the OFT presumably didn't consider the future effect of inflation, so the equivalent current value to April 2006's £12 is £17.37 (based on RPI) or £16.13 (CPI).

So arguably £12 is significantly more reasonable now than it was in 2006 (and will continue to become more so), even though the principle remains that companies should be prepared to justify actual costs rather than aligning to an arbitrary OFT threshold....

chattychappy

eskbanker wrote: »

Section 4 of the OFT report explains their thoughts on what can and can't be included in such charges and it would seem to me that any such cross-subsidy would go completely against the OFT position, which clearly expects only reasonably direct costs to be included.

As an aside, it's perhaps worth noting that by setting an arbitrary fixed threshold of £12, the OFT presumably didn't consider the future effect of inflation, so the equivalent current value to April 2006's £12 is £17.37 (based on RPI) or £16.13 (CPI).

So arguably £12 is significantly more reasonable now than it was in 2006 (and will continue to become more so), even though the principle remains that companies should be prepared to justify actual costs rather than aligning to an arbitrary OFT threshold....

Noted the point about cross-subsidy. (Correct me if I'm wrong, but cross-subsidy was found to be OK when the courts ruled on bank charges, which came after 2006. From memory, they did distinguish the situation from CCs.)

It is true £12 would be more nowadays. On the other hand, I remember in the past you used to get a separate letter in the post as soon as a payment was late and sometimes phoned you up. So I think their cost structures are lower now.

If the OP's CC has done little more than put a note on a statement and charged £12, month after month, then I believe there is a case to say the fees are disproportionate to what the breach has cost them. As I say, interest is there to cover the cost of the extended lending.

Since the OP feels strongly against about it, I'd write a letter in those terms. For £90 though, I wouldn't spend a lot of time on it.