Unfair charges are costing UK credit card holders more than £300 million in excess fees every year, the Office of Fair Trading (OFT) has said.
It has warned that credit card default charges have been set significantly above the level that would be considered “legally fair” and that any charge above £12 is excessive.
The OFT has now published guidelines laying out the principles that it requires banks to adhere to and said that it expects rapid reductions in fees.
It has given the industry until 31 May to respond to the guidelines, which will also be applied to overdraft, store card and mortgage charges.
“Our statement of principles provides practical guidance to banks which increases their incentives to compete vigorously while protecting consumers from being charged unfair amounts,” said John Fingleton, OFT chief executive.
“Our threshold approach is a spur to changes in market practice. We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively.”
The OFT added that it did not believe that the fees charged bore any relationship to the best rates that financial companies could afford to offer.
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