Cut in cost of defaults; FINANCE: Charges on credit cards reduced.
DEFAULT charges outlined in mortgage, current bank account and store card agreements could be cut by an average 60 per cent, Birmingham lawyer claimed.
After imposing a reduction in default charges on eight major credit card providers, the Office of Fair Trading may have set a precedent and opened the way for others, according to Hammonds.
Last month the OFT announced that it was requiring all credit card default charges to be reduced to pounds 12 in order to meet the test of fairness set out in the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).
The principles have wider implications for similar types of charges laid out in the terms in other agreements including those for mortgages, current bank accounts and store cards.
Elena Curzio, city-based consumer credit specialist at Hammonds, said the charges could be reduced significantly.
She said: "The OFT decided that banks and credit card companies were applying excessive charges to consumers who made a late repayment, had a cheque bounce or had their account go into an unauthorised overdraft.
"The OFT is also planning to investigate other types of repaymsent agreements across a broad spectrum of financial products - the implications could be wide ranging for the financial services industry."
Over the last few months the company has advised a number of financial institutions on the OFT announced changes.
Ms Curzio added: "Every credit card company will now have to consider whether it is going to follow the OFT's position statement and decide whether the way in which its own charges are calculated is in line with the OFT's recommendation."