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Call for investigation into credit card charges

27/06/2007

People who receive a £12 default charge on the credit card are falling victim to a "loophole" which was not identified by the Office of Fair Trading (OFT), it has been claimed.

A study by price comparison website moneysupermarket.com found that consumers are being charged interest on the fee by their banks and building societies if they do not pay their next month`s balance in full.

With the addition of this interest, the default charge exceeds the limit enforced by the OFT, the site states.

"The majority of banks have always added interest to default charges, so the OFT should have stipulated this practice had to stop," remarked Rob Kenley, head of credit cards at moneysupermarket.com.

He explained that it is often the poorest customers - such as those with high levels of debt - who default on credit card payments.

According to figures from the company, £38 million in interest could be earned by banks on the £20 million worth of default charges levied each year.

The OFT announced yesterday an investigation into holders and applicants of consumer credit licenses.

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