Money News

Credit cards: Watchdog calls a halt to 'unlawful' penalties from lenders

Credit card holders are being charged over £300m a year in "unlawful" penalties, the Office of Fair Trading has ruled.

Default charges of £25 for late and bounced payments, or a breach of the credit limit, had been set at a "significantly higher" level than was legally just, the OFT said. These charges, it added, should not exceed a "fair" threshold of £12.

It called on all card issuers to recalculate their penalties, and stressed it would challenge any future fees above this level in the courts - unless there were "exceptional" reasons for them.

This tough ruling also applied to default charges on other products, including current account overdrafts and store cards - although no threshold figure for these was announced.

All default charges should "only reflect the administrative costs" of dealing with the default, the OFT stressed. Although it conceded that only a court could ultimately decide whether an individual charge was unfair or not, it expressed confidence in its view of the law.

The lenders have until 31 May to respond.

Paul Smee, the head of the Apacs payments body, defended the fees as "fair, transparent and lawful" and argued that only one in five people pay default charges a year.

The average cost for a late credit card payment is £23.13, according to price-comparison service MoneyExpert.com.

The National Consumer Council said it was "delighted" to see an end to "rip-off bank charges".

"Arbitrary penalties imposed by banks on consumers have caused stress and misery and are just not acceptable," said spokeswoman Claire Whyley.

Cheques: Cash and card only at Asda

Cheques edged a little closer to extinction last week when Asda banned their use at several stores.

The supermarket chain began a 12-week trial of its cash-and- plastic-only policy at 21 branches within the M25 last Monday.

Asda said its move followed a steady decline in cheque use: of the 13 million people who go through its doors each week, fewer than 2 per cent pay by cheque.

"We want to see if this reduces queues at the checkout. Paying by cheque is far more time consuming than paying by cash or debit card," said a spokesman.

There was also, he added, a greater risk of fraud in using cheques.

If successful, the ban could be rolled out across Asda's stores nationwide.

Customers in the pilot areas will be able to use their chequebooks for the next three weeks if they have no other way of paying. For the remaining nine weeks, that won't be an option.

Oil giant Shell stopped accepting cheques at its 586 UK forecourts last September, describing the move as "in line with the general trend in the retail sector".

Cheques account for only 6 per cent of all retail spending, compared to 60 per cent for debit and credit cards, according to the payments body Apacs.

The peak for cheque use was in 1990, when 11 million a day were issued.

Television: Viewers in the dark over digital switch

Plans for a switchover from analogue to digital television remain a mystery to many viewers, consumer body Which? has warned.

Public awareness of the impending transfer is "alarmingly low", it found in a survey.

The current signal is to be turned off across the UK region by region - beginning in the Borders area in 2008 and ending in London in 2012. Yet around four in 10 UK viewers are unaware of this, and only 7 per cent know when the analogue signal will be switched off in their area.

Half have failed to realise that, to carry on watching television after the switchover, they will need a Freeview box, or a Sky or cable package for each TV in their house.

There are still 26 million sets that need modifying, says Ofcom, the telecoms industry watchdog, while other equipment, such as video recorders and aerials, may also need replacing or upgrading.

Findings from Ofcom suggest it will cost each household around £132 to prepare for the change. But Which? believes this is a "conservative" estimate, especially for those who need a new aerial.

Digital UK, a body supported by the Government, has been set up to oversee the process. Which? wants the group to be more vocal and give viewers the information needed for a smooth transition.

Interest rates: It could be 4.5% till December

The Bank of England has voted to keep the base rate on hold at 4.5 per cent, leaving the cost of borrowing unchanged for the eighth month in a row.

Last Thursday's decision had been widely expected by City analysts, economists and the financial markets.

The different, and contradictory, pressures applied by a growing economy, steady housing recovery, lack of consumer confidence on the high street and rising fuel prices led to the decision of the Monetary Policy Committee to leave well alone.

The Bank last changed the base rate in August, when it dropped a quarter of a point from 4.75 per cent.

No rate move is expected for some time, and some economists now predict it could remain frozen until the end of the year.

Ray Boulger at broker John Charcol said that while he expected the next move in the base rate to be down, it looked more likely there would only be one cut this year.

The latest decision came as the Halifax revealed that house prices grew by 0.9 per cent in March, pushing annual price inflation to 6.2 per cent.