Late Payment Fee - Penalty charge or recovery of costs

Smasher

jonesMUFCforever wrote: »

Whilst it could be either of what the OP suggested it has been made clear that the £12 is fair.

Rubbish! :rolleyes:

exel1966 wrote: »

£12 Fine/Fee/Charge/Penalty/Excess, call it what you like, the fact remains, it's been officially declared fair and just !

More rubbish! Please show us where you got this "information".. :rolleyes:

MarkyMarkD wrote: »

Yes, but the OFT have said that they won't take any action against charges of £12 or below, which is tantamount to the same thing.

Is that a fact or an opinion? You are putting a bit of a spin on what the OFT said.
They never said "we won't take any action against charges of £12 or below" they said that £12 is the threshold at which they will automatically intervene, but they made it clear that just because a charge is under £12, doesn't mean it is fair.

Either it is legal or it isn't, and given that credit card issuers still refuse to answer a claim in court suggests they have little/no confidence in proving that it is "fair" or even legal.

A late payment fee, even one of £12, should be contested as a penalty. So far, not one single credit card company has attempted to prove otherwise in court. It will be costing them millions so just one successful defence should make much better "commercial sense" than to keep paying out in settlements, especially given that many claimants apply contractual compound interest.
Why won't they step into court & defend just one case? Why?

Here is a link to the original report. To those of you who I have quoted, please take some time to read it, then you can post based on facts in future.
http://www.oft.gov.uk/news/press/2006/68-06

MarkyMarkD

Actions speak louder than words. It is well over a year since the original OFT report, and they haven't taken action against any card issuer even though they virtually all charge £12.

As I previously said in the part of my post which you haven't quoted, the obvious consequence of what the OFT did was that all card issuers would charge £12. If the OFT had intended any different consequence, they wouldn't have named an amount - they would have said that they would take action against any issuer whose late payment fees exceeded their own individual cost level.

There is a sharp contrast to the way the OFT handled things and the way the FSA dealt with the MEAF issue. The FSA demanded a response from each lender as to how they were going to charge MEAFs in future and how they would deal with complaints. Each lender is acting in accordance with the position they've agreed with the FSA and things are relatively orderly.

Instead of taking an individual approach, the OFT attempted a "quick fix" solution of issuing a statement suggesting that anything over £12 was inherently unfair, but not really dealing with the situation for fees of £12 or below. And the consequences were entirely predictable. As Smasher says, there is no evidence one way or the other about the fairness of a £12 fee as all the OFT have bothered to say is that fees over £12 are unfair.

Smasher

Yes I'll go along with your view of the OFTs approach, just like their handling of the test case, barely half a job.. However, sticking to the £12 issue, they made it clear that just because a charge is under £12, doesn't mean it is fair. Your suggestion that the intention was to set £12 to be a fair charge is just your point of view based on how you have interpreted what you have read, nothing more. This view continues to be disputed by claimants in their thousands with absolute success..

I agree that the £12 threshold was, as you say, an attempt at a quick fix. Just the OFT trying to be seen to be doing something to justify their existence. I wonder if they realised that their next attempt to be seen to be doing something would have people laughing at the guy they sent to court whilst he often lost his way & tied himself up in knots trying to present his case.

Indeed, actions do speak louder than words.
Thousands of people continue to take credit card issuers to court over £12 late payment fees, some even apply contractual compound interest to the claim, in some cases more than doubling the amount claimed, and still the CC companies prefer to settle in full rather than attempt to justify the charges in court. That pretty much answers the bottom line of the OP loud & clear.

MarkyMarkD

Making a commercial decision to settle cases costing a few hundred pounds, rather than incurring millions of pounds going through the courts (and with the inherent risk of establishing an uncomfortable precedent) is proof of nothing other than the card issuers' commercial judgement.

It certainly doesn't establish proof that £12 is unfair.

Smasher

Of course not, in the same way that setting a £12 threshold doesn't establish or imply that £12 is fair.

The only way to settle it is for them to prove that their costs/losses are £12 and they have had thousands of opportunities to do so..
It wouldn't cost millions to challenge a claim in a county court and although county courts do not set precedents, as long as they could successfully defend a handful of cases, they could then counterclaim for costs. Just one or two successes would be enough to put people off claiming. It would be a simple case of demonstrating, as they claim, that £12 is a genuine pre-estimate of their costs/loss.

We're not talking only of claims of "just a few hundred pounds". There are plenty of credit card claims going way up into the thousands, my own (settled) included. The "commercial decision" to settle is a bit laughable really. I remember banks were still saying that early on in 2007 after they had paid out getting on for £1bn!

I would say it is more likely that the uncomfortable precedent as you put it (although not binding on other county courts) and the probability that they simply wouldn't be able to justify the charges in court is what prevents them from challenging a claim. Even if it did cost them millions, it would still be less than they continue to pay out in settlements..