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.