Late payment fees - are they legal?

OldReuben · 1 October 2005 at 10:08PM

Hi. Because I missed a payment on my Barclaycard account (first time this has happened) they have hit me with a late payment charge. Not only that, as a result of the missed payment, I have gone slightly over the credit limit, so they've charged me for that also!

Earlier this year, the "Guardian" reported that the Office of Fair Trading had made a provisional ruling that charges such as these were excessive and legally unenforceable. It said that banks should reduce the charges to those which compensate for "certain types of loss that were reasonably foreseeable at the time that the contract was made".

This means that charges should reflect actual costs to banks caused by late payment, which is usually just the postage, stationery and minutes, if not seconds, of staff time involved in the sending of a computer-generated letter.

I've therefore written to Barclays along the above lines, quoting the OFT's ruling. I was wondering if anybody else has invoked the OFT's ruling to try to get these charges waived (or reduced) and, if so, what was the reaction from their card issuer?

Thanks,

JOHN

bonvonnie · 1 October 2005 at 10:21PM

how late were you with your payment? and how long have you been with Barclaycard

If you have been with them a year or so, and you have made your payments ontime, its worth ringing them up and see if they can waive the fee if you were a day or 2 late.

you wont be able to get the over limit charge back as those are listed in the T&C's but the late payment is worth ringing them up, if its just the 1st time, and it wasnt too late

YorkshireBoy · 1 October 2005 at 11:03PM

Firstly, to answer the question in your post title - Yes, they are legal. They form part of the contract you entered into when you signed the credit agreement.

OldReuben wrote:

Earlier this year, the "Guardian" reported that the Office of Fair Trading had made a provisional ruling that charges such as these were excessive and legally unenforceable.

The OFT's press release is here...

http://www.oft.gov.uk/News/Press+releases/2005/135-05.htm

"The OFT believes that it is unfair for the purposes of contract terms regulation to require a consumer who defaults in one of these ways to pay a disproportionately high charge.

The OFT's provisional view is that the levels of the default charges imposed by the credit card companies need to be reduced in order to be fair.

The OFT has now explained to them why it does not accept their view and has given them three months in which to provide suitable undertakings or otherwise to address the concerns it has raised."

There is no doubt that the credit card companies will reduce the level of the current "fines" to an amount that the OFT is happy with.

There is also no doubt that the credit card companies will seek to recover this lost revenue from elsewhere. Indeed, since the OFT's press release, we have seen many providers increasing their APR's (eg Egg from 14.9% to 15.9%) against a backdrop of falling interest rates generally (eg BOE base rate cut from 4.75% to 4.5%). A further source of revenue will be the (re)introduction of annual fees for credit cards (eg certain MBNA cards have started already).

So, the consumer will still pay - it's just that the revenue required by the credit card companies will come from ALL cardholders - not just those who contravene the T&C's of their contracts.

Let me close by giving an analogy...

I know that I have to pay my credit card bill by the 27th October. I know that the penalty for not doing so is £25. I also know that the penalty will be increased to £50 because I'm on my credit limit this month.

I also know that I have to pay my car insurance by the 31st October. I know that the penalty for not doing so, should I drive the vehicle on a public highway on the 1st November, is (say) £200 and 3 penalty points.

I appreciate that one of these is "the law of the land", but is there a difference in how I should treat these two responsibilities I have this month?

========

I (genuinely) wish you good luck with getting the charges withdrawn.

StevenP_2 · 2 October 2005 at 8:06AM

bonvonnie wrote:

you wont be able to get the over limit charge back as those are listed in the T&C's but the late payment is worth ringing them up, if its just the 1st time, and it wasnt too late

This doesnt make sense

So you are saying that the late payment charge ISNT in the T& C`s ?

bonvonnie · 2 October 2005 at 8:43AM

well, i kind of mean that if are have been a long customer with them and have always made payments on time, then you COULD get the late payment charges withdrawn at their discretion.

Iona_Penny · 2 October 2005 at 8:44AM

It is so frustraing for these situations to occur especially when it is our own fault (when I had cards this happened to me all the time and then some) My husband has missed a payment on Mint before because we were away and phoned and explained very nicely and they refunded the £25 ( he did not go over the limit)

Following advice from this site he now has a direct debit which pays the minimum monthly amount ( ensuring late payment charges are never accrued) and then we send a cheque for the remainder we are paying off.

I also wonder personally if a pleasant, apologetic, phone call may not have been at least as productive as an abrasive letter when clearly the fault was yours.

OldReuben · 2 October 2005 at 2:08PM

To answer Iona Penny's point, as I was going to be away for several weeks, and knew there was a danger of missing a payment, I rang Barclaycard Customer Services before going, and asked if I could set up a DD for the minimum monthly payment - they said this was not possible!

Other credit card issuers were happy to do this and I really don't understand why it posed a problem for Barclaycard.

JOHN

Late payment fees - are they legal?

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