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Credit cards 'to get tough' with customers | |||||
| Credit card customers who pay late could be forced to pay higher interest rates than prompt payers, a debt expert gave warning yesterday. David Black, head of banking at Defaqto, a financial products research business, predicted that credit card companies, keen to recoup money lost since a crackdown on their charges by the Office of Fair Trading earlier this year, may follow the example of US lenders that increase their APRs for late payers and those who exceed their limit. Consumer groups expressed concern that such a move could leave those in financial difficulties in a worse position. Several credit card companies in the US charge inflated APRs for late payers. Capital One can raise the interest rate on one its credit cards from 13.9 per cent to 19.9 per cent if a customer is three days late with two payments. Customers with a Washington Mutual credit card could see their interest rate rise from 9.99 per cent to 31.99 per cent if they miss the deadline on just one payment. Mr Black said: "I would be surprised if a credit card company in the UK does not introduce this scheme within a year. And once one does, the others will follow." The Office of Fair Trading said that it would look at such a scheme, but indicated that adopting this form of penalty would not contravene any rules. A spokesman said: "We would consider looking at it, along with the Financial Services Authority, but as long as the charges are made clear, then we wouldnt have too much of a problem with that." But Which?, the consumer body, was less sanguine at the prospect of inflated interest charges. Pula Houghton, senior policy advisor at Which?, said: "While this is speculation at the moment, we think that levying a penalty in charge of interest could be potentially confusing for customers. Also, we would never support something which makes it harder for consumers to pay off their debts." Mr Black also forecast that more credit card companies would resort to charging annual fees. Only one or two lenders currently charge a yearly fee for their credit card. "Annual fees will more likely be introduced for people who pay off their balance every month rather than for those who carry debts. Those who have debts on their cards are more easily targeted by an increase in interest rates," Mr Black said. The Office of Fair Trading cracked down on late payments charges earlier this year. It ruled that the charges, which averaged £22, were too high, and ordered credit card companies to cap such fees at £12. Experts say the move will cost banks and other lenders tens of millions of pounds. For this and other news items please visit www.debtscotland.com. By registering on the site you will find a host of debt recovery and credit control tools in the free credit resources section. Stephen Cowan Yuill & Kyle, debt recovery & credit control lawyers, Scotland 79 West Regent Street, Glasgow G2 2AR scowan@yuill-kyle.co.uk, Direct Dial: 0141-572-4251 www.debtscotland.com, www.ykcreditcheck.co.uk | |||||
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