Britain's consumer watchdog told credit card companies on Wednesday to cut penalties for the late payment of bills by about half from their current level and signalled other bank charges need to come down.
The Office of Fair Trading (OFT) said the principles in its decision on credit card default charges would apply to other bank charges such as those for overdrafts, store cards and mortgages.
The OFT said excessive penalties on the late payment of credit card bills had led to unlawful charges of more than 300 million pounds ($524.1 million) a year across the industry, and analysts said banks could lose about 1 billion pounds in gross revenue when the ruling is applied to other charges.
The watchdog cannot impose a cap on fees, but said it expected credit card issuers to quickly adjust their default fee and would take legal action if necessary. "This is our view of the law and we're saying very clearly that we're prepared to litigate or take other measures if we don't get a resolution at this stage. There's been enough chatting about it," OFT Chief Executive John Fingleton told Reuters in an interview.
The OFT has estimated cardholders pay 20-25 pounds if they fail to pay their bill on time, exceed the credit limit or their payment fails to go through. It said the default charge should only recover limited administration costs.
The OFT said charges above 12 pounds ($21.03) would be presumed to be unfair, though levels below that threshold could also be challenged.
The industry has until the end of May to respond.
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