The U.K.'s Office of Fair Trading (OFT) released a statement last week on credit card default charges. OFT found that current levels are unfair and requested that all card issuers calculate the cost of issuing default charges including staff costs, printing and postage costs and use this as a basis for the fee imposed. It also set the level of charges to the maximum of GBP12 ($21). If card companies charge beyond this amount, the OFT will investigate to see if the fee charged is fair to the consumer and take legal action, if required.

According to figures reported by the U.K.'s Competition Commission, default and late payments account for around 13% of total card income. Analysts at the Royal Bank of Scotland predict that if fees are reduced on average from GBP25 ($43) to GBP10 ($17.5), excess spread could fall by an annualized 1.4% for the average trust.

Spreads should remain unchanged on the news given the current high levels of excess spread in the trusts - apart from Affinity which posted a three month average of 2.6%, said RBS analysts. However, they caution to remain watchful for further regulatory pressures on other charges such as interchange fees, payment protection insurance and credit card checks - which are all currently under investigation.

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