UK Credit Card Companies To Crack Down On Late Payers

A financial professional has warned that credit card companies in the UK may soon start to take after US based credit card companies by coming down harder on those that make late repayments through increased interest rates on their borrowing. The Office of Fair Trading cracked down on the charges and fees charged by credit card companies in the UK earlier in the year, and experts state that increasing interest rates for late payers will enable the companies to recoup some of the losses resulting from the crackdown.

The Head of Banking at Defaqto, David Black, recently predicted that these crackdowns by credit companies would not be far off, and that the card companies need to find a way to recover the losses that they have incurred as a result of the Office of Fair Trading regulations regarding their fees and charges. Officials from consumer groups have added their concerns over the financial impact that this could have, with increased interest rates leaving those already struggling to keep up with repayments in an even worse position.

At present there are a number of credit cards that operate this way in the United States, and depending on the card those that are late with repayments on just a couple of occasions could find the interest rate on their borrowing pushed up from nearly fourteen percent to nearly twenty percent APR. If card companies in the UK follow suit, those that struggle to keep up with timely repayments on their cards could find themselves hit with unmanageable interest charges.

The Office of Fair Trading have suggested that this process would probably be acceptable, with one official stating: "We would consider looking at it, along with the Financial Services Authority, but as long as the charges are made clear, then we wouldn’t have too much of a problem with that."

Alisdair Milton
23rd November 2006

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