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Best Practice

OFT intervention

Recent developments in the credit card industry have resulted in many balance transfer deals becoming less attractive. In April 2006 the Office of Fair Trading (OFT) stated that default charges set by credit card companies for failure to make a minimum payment by a due date, exceeding a credit limit or failing to honour a payment made have generally been too high.



These charges should only be used to cover the administration costs incurred by credit card companies in dealing with defaults, such as postage and IT and staff costs, but the OFT estimated that there were unlawfully unfair charges made of more than £300m a year and set a threshold of £12 above which it would presume a charge is unfair and challenge it.

While credit card companies agreed to reduce their fault fees accordingly, they have sought to recoup the resulting losses by increasing their income in other areas. Credit card companies were previously making £675m from penalty charges each year but this has fallen to £379m since the OFT’s intervention.
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