Egg penalty charges - refusal by FOS

[100mel]

I requested a refund of charges - overlimit charges etc - from Egg - all statements online so I didn't initially realised that I had been charged particularly when the charge had gone through

In short they refused and so I complained to FOS who also turned me down - they wrote and advised that Egg had justified the cost of their charges even though these exceeded the OFT level of £12.

Wondered what experiences anyone else had had with Egg and if there were any other options available to me to try and get some of this money back.

[natweststaffmember]

Re: Egg penalty charges - refusal by FOS

The OFT gave Egg a dispensation to charge £16 on credit card charges.

[Brian]

Re: Egg penalty charges - refusal by FOS

Nattie, can you advise when the dispensation was granted for that.

Bri

[EXC]

Re: Egg penalty charges - refusal by FOS

The OFT statement that required egg to lower it's charges to a minimum of £16 was made in 2006 (June from memory) but I'm not sure when it came into effect - will check and post some info on the OFT's position re Egg charges later.

[natweststaffmember]

Re: Egg penalty charges - refusal by FOS

Statement on bank credit card default fees - The Office of Fair Trading
I think this might refer to the statement.

[EXC]

Re: Egg penalty charges - refusal by FOS

The statement was April 2006. The timetable for the implementation isn't too specific so I'm not sure when Egg actually reduced their charges to £16.

1.17 We expect all credit card issuers to take on board the principles contained in this statement and to recalculate their default charges accordingly. Credit card issuers are being asked to confirm by 31 May their response to this statement and their willingness to make any necessary adjustments to their credit card default charges. We are mindful that changes to a default charge may require IT system and other business changes by the credit card issuers. Some of these changes may take some time to fully implement, for example updating documentation for consumers. Nevertheless, in view of the scale of consumer detriment involved in the imposition of unlawful default charges, we consider that steps to reduce charges should be taken as a matter of exceptional priority even if this means that consequential changes occur at a later date. We or our co-enforcers will investigate further and will take appropriate action if change does not occur within a reasonable timescale.

This is some info on why Egg were able to charge £16 rather than £12 from a Freedom of Information request to OFT:

Egg reduced its charge to £16 after the OFT action in April 06. As you will see from the OFT press release issued on 5 April 06 where credit card default charges are set at more than £12, the OFT will presume that they are unfair, and is likely to challenge the charge unless there are limited, exceptional business factors in play. Exceptional business factors which may affect the level of a fair charge may include policies to prevent casual defaults as operated by issuers such as Egg.

The press release goes on to say where there are exceptional business factors, so that the presumption that a default charge over £12 is unfair is not applicable, this does not necessarily mean that the current level of the default charge is consistent with the OFT's interpretation of the requirements of unfair contract terms legislation. But for example, where a card issuer has a policy of requiring customers to pay minimum monthly repayments by direct debits, such as that operated by Egg, and offers credit cards only to customers that satisfy a relatively high scoring requirement it may be able to set a fair default fee at a level above the threshold.

1 We have not given Egg an indication that a default charge of £16 is fair. We do however accept, as previously explained, that, where a business operates exceptional factors, the presumption that a charge above £12 is unfair may not apply and that a business may be able to justify as fair a charge in excess of £12.

2We have never stated that £12 is a fair charge. £12 is a threshold for OFT intervention. However, as I indicate above, and as you are aware, we have made clear that where a business operates exceptional factors the presumption that a charge above £12 is unfair may not apply and a higher charge may be fair. Further to this, in light of commercial information supplied to us by Egg, and as a matter of administrative priority, we took no further action against Egg. In view of on going work in the bank charges area, this position has not changed.

3The OFT would consider a requirement (as opposed to an option) to pay credit card bills by periodic direct debit to be an exceptional business factor in some circumstances.

The example of an exceptional factor the OFT uses in its April 2006 statement is that of a bank that (1) offers credit cards only to customers who satisfy a relatively high credit scoring requirement; and (2) has a policy of requiring those customers to pay minimum monthly repayments by direct debits. In ‘Calculating fair default charges in credit card contracts,’ published in April 2006, we provide information on exceptional factors and explain that as a result of these an issuer may find it has fewer incidents of default over which to spread recovery of its fixed costs. The denominator (the number of defaulting consumers) it uses to calculate default charges may therefore be lower. It would, however, still be necessary, in assessing the level of a fair charge, to review whether only recoverable costs were being taken into account in the numerator (the total amount of costs sought to be recovered in default charges).

[whatnest]

Re: Egg penalty charges - refusal by FOS

It was August 2006 they reduced charges to £16.