OFT force Barclays/CFS to cut store card charge

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http://www.oft.gov.uk/news/press/2008/44-08

[Amethyst]

Re: OFT force Barclays to cut store card charge

Clydesdale Financial Services to reduce store card default charges

44/08 1 April 2008
Following an approach by the OFT, Clydesdale Financial Services Limited, a wholly owned subsidiary of Barclays Bank plc, has decided to reduce its store card default charges from £22.50 to £12 with effect from today.
This action, prompted by a consumer complaint, follows earlier work by the OFT on credit card default charges. In April 2006, the OFT stated that credit card default charges had been generally set at a significantly higher level than was considered fair. The April statement also indicated that the OFT considers that the broad principles outlined in relation to credit card default charges apply to default charges in other standard agreements with consumers such as those relating to store cards. In view of the proposed reduction in charges by Clydesdale Financial Services, the OFT is satisfied that no further intervention by it is warranted at this time.
Mike Haley, OFT Head of Consumer Protection, said:
'This is a great result for consumers and we are very pleased that Clydesdale Financial Services has decided to reduce its charges.'
NOTES
1. For more information on the OFT's statement of principles in relation to credit card default charges see press release 68/06.
2. A fair default charge should not exceed a reasonable estimate of certain limited administrative costs which the business concerned reasonably expects to incur as a result of default.
3. The threshold for action in relation to credit card default charges does not apply to other types of default charges. However the OFT takes the view that the principles stated by the OFT do. It was on this basis that the OFT approached Clydesdale Financial Services.
4. The OFT has published a short guide (pdf 67 kb) for consumers and consumer advice agencies setting out the principles on which credit card default charges should be calculated.

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Re: OFT force Barclays/CFS to cut store card charge

Ooops...looks like CFS aren't too happy.

http://news.bbc.co.uk/1/hi/business/7324825.stm

[Amethyst]

Re: OFT force Barclays/CFS to cut store card charge

Row over store card default fees


The OFT ordered a cut in credit card default fees in 2006

A store card issuer has cut its charges for people making late payments or going over their credit limit after an approach from trading authorities.
Clydesdale Financial Services, owned by Barclays, has cut its default fees from £22.50 to £12.
But the group, which produces some store cards for High Street retailers, disagreed with the Office of Fair Trading over the basis of the decision.
The OFT launched a crackdown on credit card default fees in 2006.
Customer complaints
Clydesdale Financial Services provides store cards on offer at retailers such as photographic specialist Jessops, fashion store Viyella and Scottish Hydro Electric.
In April 2006, the OFT said that credit card default charges had been set at an unfairly high level industry-wide and ordered that default charges be cut across the board to £12.
It added that the rules should also cover some other products such as store cards.
Prompted by a customer complaint, the OFT made its first approach to an individual provider, rather than the industry as a whole, leading to Clydesdale Financial Services reducing its charges as of Tuesday.
Strong words
However, the provider defended its fees as "transparent, legal and wholly avoidable".

This is a great result for consumers


Mike Haley, Office of Fair Trading

"The company disagrees strongly with the OFT's legal analysis and conclusions but has decided to make the change, following discussions with the OFT, to remove uncertainty and create clarity for customers," it said under its new name, Barclays Partner Finance.
The OFT said it would not be taking any further action following the cut in charges.
"This is a great result for consumers," said Mike Haley, OFT head of consumer protection.
Refund push
Consumer group Which? said that in terms of fairness for consumers, store cards should come under the same rules as credit cards.
Phil Jones, personal finance campaigner at Which?, advised anyone who had been charged at £22.50 since April 2006 to contact Clydesdale Financial Services to bid for a refund.
He suggested that store cards were "almost always a bad deal" for consumers who did not pay off their balance every month, as charges were often higher than with best buy credit cards.
Campaigners have been calling on the OFT to be stricter in policing their 2006 rules on default fees.