Are you being charged a penalty for doing nothing?

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http://www.timesonline.co.uk/tol/mon...cle6822021.ece

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Re: Are you being charged a penalty for doing nothing?

Customers of telecoms providers, credit card companies and other financial organisations are being warned to watch out for fees that penalise them for doing absolutely nothing.
“Low use” or “inactivity” fees, which are imposed if you use your account rarely or not at all, are becoming increasingly common as companies look for ways to boost under-pressure profit margins and other charges are outlawed.
However, disgruntled consumers are being encouraged to fight back against the fees, which are only one of a growing number of what Which?, the consumer organisation, describes as “small but sneaky” charges. Experts say that customers should challenge fees that they believe are unfair or have not being explained clearly. If that fails, they should demonstrate their displeasure by moving their business elsewhere.
Ingrid Gubbay, of Hausfeld & Co, the consumer and human rights law specialist, says: “There may be a case to challenge the fees if you feel that you were not informed about them or you can demonstrate that the charges are unfair. They may be unenforceable if they are not simply covering administrative costs but are a penalty for not using an account.”


Given the economic downturn, experts say that it is not surprising that such charges are on the rise. From next month American Express will impose a £20 “dormancy fee” on existing customers who do not use its Platinum cashback credit card for a year. The fee has been introduced immediately for new customers.
Similarly, BT imposes a charge of £30 a year on certain customers who make less than two BT phone calls a month — not uncommon if you use your BT line solely for broadband, or your calls are provided by another company. Stockbrokers are also fond of charging customers who leave their accounts idle, demanding fees of up to £58 a year.
More businesses are expected to follow this trend as companies try to weed out unprofitable customers. David Black, of Defaqto, the financial research company, says: “It costs companies to issue credit or provide other services, even if a customer never uses them. Dormancy fees are a way of boosting margins which are being squeezed in many businesses. Either customers pay the fees, start using their accounts more frequently or quit. In each case the company is a winner.”
Even though the fees can sound trifling initially — less than £1 a month in some cases — they add up over time and can make it difficult to budget and compare deals. Critics are concerned that consumers are too easily caught out by this “confusion marketing”. The charges are also easy to miss unless you pay close attention to the small print on your bills and other correspondence.
David Kuo, director of The Motley Fool, the financial website, says: “It is so easy to read the headline in an advertisment and accept it at face value and forget to drill down into the terms and conditions. Service providers rely on this inertia to sell us products that we might otherwise avoid. Often it is not until we are hit in the pocket that we appreciate that there are never any free lunches where money is concerned.”
Companies should inform customers of the charges before they are introduced. They can even introduce the fees during the middle of a contract, as long as they are spelt out clearly and customers are given notice. For example, the Banking Code, which most credit card issuers follow, requires them to tell customers “personally” at least 30 days before a new charge comes into force.
The Office of Fair Trading (OFT) adds that all descriptions of a contract’s terms must be expressed in plain and intelligible language. It says: “A term is open to challenge if it could put a consumer at a disadvantage because he or she is not clear about its meaning — even if its meaning could be worked out by a lawyer.”
The companies are well aware of the rules, so the chances that you will be able to challenge a low-usage fee on these grounds is slim, according to Marc Thorley of Simmons & Simmons, the law firm.
Whether they can be assessed for fairness should become clearer when the bank charges test case, currently being heard in the House of Lords, is decided. Mr Thorley says: “The bank charges case should settle whether such terms are open to challenge once and for all.”
Companies that charge low-usage fees insist that they are fair. They argue that, were they unable to impose the charges, the cost of maintaining unused accounts would be borne by regular customers. But it is still worth challenging charges that you are unhappy with. The company may tell you to close your account, but at least you know where you stand.
Mr Kuo says: “My advice is to find out what the company in question will offer you. If it values you as a customer, it may drop the fee or offer you another deal. If that fails, take your custom elsewhere.”
In the meantime, forewarned is forearmed. Here are the low-usage fees that you may be paying, even if you didn’t realise it.
Credit cards
American Express is not the first company to introduce fees on inactive credit card accounts. Nor do experts think it will be the last as card providers struggle with rising bad debts and look for ways to recoup lost revenue after the OFT forced companies to reduce their fines for late or missing payments, from as much as £35 to £12.
The Santander Zero credit card and Santander credit card already carry a £10 dormancy fee if they are unused for six months, though the bank says that no customer has yet incurred the charge. In 2007 Lloyds TSB wrote to low-usage cardholders before imposing a one-off £35 charge for inactive cards.
Prepay cards
These have become a popular alternative to traveller’s cheques because you load them with cash before you travel. However, many charge an inactivity fee. Travelex, for example, would charge £35 a month if you loaded its prepay card with South African rand (£2 a month if it was loaded with sterling), the card is in credit and you have not used it for more than a year. This is not charged on cards with a zero balance.
Home phone
Millions of people who have contracts with broadband suppliers, such as Talk Talk, still have to sign up for a BT landline. They could find themselves paying a low-usage fee to BT if they make less than two chargeable BT calls a month (if billed monthly) or six calls every three months (if billed quarterly). For example, there is a 98p-a-month charge to these customers if they have signed up for BT’s 1571 voicemail service, which is free to more regular customers. There is also a £2.50 monthly charge for BT Caller Display.
Share dealing
If you have been too nervous to invest over the past year but have a share dealing account with an online stockbroker, you may have been stung by an inactivity fee. These are charged by some, but not all, stockbrokers. E*Trade UK has one of the steepest at £4.13, plus VAT, a month if you have not made a single trade in the past three months.
Charges checklist
Read the small print. Details of inactivity fees are often buried in sections headed “charges” or “account management fees”.
Do not ignore letters or leaflets telling you about “changes to your account”.
Examine your bills every month. Many companies encourage customers to adopt web-based billing. But if you are the sort of person who forgets online passwords, stick with paper bills.
If you do not like the fees and do not want to change your behaviour, close your account.