OFT announce investigation into bank charges

In response to the OFT's statement of principles on the calculation of credit card default charges, credit card issuers have agreed to reduce their default charges - the majority by almost half.

In April, the OFT stated that credit card default charges had been generally set at a significantly higher level than was considered fair and set a 12 threshold for OFT intervention unless there were exceptional business factors. Many card issuers have stated that they do not agree with the OFT's view of the law and that they believe that their default charges were fair but, in view of the reduction in charges across the market, the OFT is satisfied that no further intervention is warranted in this area at this time and that this change has brought about substantial benefits for consumers.

The April statement also 'The reduction of default charges on credit cards is great news for consumers. By taking an innovative approach to this issue, the OFT has brought about a significant change in one area of the financial services sector. We are now extending that work to inform ourselves about account default charges. We welcome the willingness of organisations such as the BBA to work with us in looking at the application of the principles we set out in the April to this area.'

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I will leave it to others to comments but this help* settle the arguments about whether banks should refund bank charges to customers and if so, should it be all the charge or just a % (i.e. above xx/charge)

Regards Sunil

*obviously anything the OFT says is not definitative - that can only be done by the courts
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Sunil Sood
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