The major U.K. credit card lenders announced last week plans to cut penalty charges by almost half their current rate. For issuers, this means finding new ways to generate yield that could translate into higher charges for the consumer.
The recent legal and regulatory challenges faced by the U.K. credit card industry will affect yield in the short term, but market sources believe that card issuers will find other avenues to replace that lost yield. The latest change comes via the Office of Fair Trading (OFT) investigation into penalty charges. The OFT said in March that credit card charges for late or missed payments were set at a significantly higher level than is economically fair and said that it would consider any penalty charge of more than GBP12 ($22) as being unfair.