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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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