Credit Cards/Penalties/Bank Default Charges

[StoneLaughter]

Can anyone explain to me, without using too much legalese, why the default charges on Credit Cards can be regarded as penalties but the ones on bank accounts cannot?

What is the difference in Law between the two situations?

[EXC]

Re: Credit Cards/Penalties/Bank Default Charges

Credit cards have yet to be tested in court as to whether they're penal and bank charges have of course. Although with ccs they'ed have a tough time convincing a judge that default charges are fees for a service.

[Budgie]

Re: Credit Cards/Penalties/Bank Default Charges

Credit card default charges are usually in respect of

1) Late payment or 2) Over credit limit.

IE You must pay at least the minimum payment before a certain date, if you do not then you will be charged. You must not allow your account to go over the credit limit, if you do then you will be charged. Credit card charges are therefore penal as it is clear that there is no way the charges can possibly be interpreted or disguised as a service charge or fee. They are applied directly because you are in a default situation and the default condition and it's peanlty are clearly linked.

Although we all believe that the same is true for bank charges it has been decided by the High Court that the advice / recommendations contained within personal current account contracts regarding not exceeding your overdraft limit, presenting items for payment when there are not sufficient funds etc are not actually directly linked, in a contractual sense, to the default charges that the Banks apply. As there is no actual direct connection then the terms applying the charges cannot be considered as capable of being penal. ( The one possible exception to this is a term contained within NatWest pre 2003 contracts which does appear to directly link the default action and the charge to be applied ).

Budgie

[StoneLaughter]

Re: Credit Cards/Penalties/Bank Default Charges

Cool thanks guys