charge cards - when is a penalty not a penalty....

chorlton1 · 27th January 2007, 15:24

Help!!

I have posted this in Barclays to no avail so thought would try here...

To set the scene, I have recently had an in full settlement from American Express on a charge card. On that card, as with all charge cards, no interest is levied on what you spend and the full balance is paid back monthly by DD. If the DD is refused, Amex charge a penalty at a fixed rate on the balance (effectively "interest") but they call it a late payment fee.

I also had a Barclays Premier Card, also a charge card. Same rules applied as with the Amex card - I paid the monthly balance in full by DD and there was no interest applied. On that account, when my DD was returned unpaid by my bank, Barclays Premier Card applied 3pct/month "interest" charge (they called it "interest on your standard balance") to the full balance of the account. This is the only time "interest" was ever charged during the life of the card. There were no other charges of any varietty applied, eg late payment charges, other than the 3% "interest".

My question is this - Does the "interest" therefore represent a penalty charge and as such can it be reclaimed as unlawful?

3% per month is clearly more than Barclaycard require to service my debt, as otherwise they would charge that as the standard interest rate on all their credit cards.

I strongly believe I can recover at least some of this (say the difference between the standard barclaycard interest rate and 3%) but I would like some advice from those who know,and also if there is any precedent.

I have trawled all the threads I can but cannot find a similar case, although I cannot believe I am the only charge card holder who has been late in paying!

Any advice gratefully received - the total claim would be over 7k

JonCris · 28th January 2007, 04:58

chorlton this needs some thinking about. As you say these are charge cards.

In the meantime can you tell me if any of your previous payments where made before their due date or on it

chorlton1 · 28th January 2007, 08:54

The account was active for about 7 years.

Other than once in about 2003, the account was paid on time every month until early in 2006, when my finances went a little pear shaped for a few months.

Other than the one occasion in 2003, and then from March 2006 onwards, there was no interest or penalty applied to the account at any stage.

The only time interest was applied was when my account was unpaid.

As the balance was over 20k when it went wrong early this year (I use the account a lot for business and some money I was expecting didnt come through so I couldnt pay the DD), the "interest"/penalty was racking up at over £700 a month

Its all paid off now and the balance is zero, but not after 8 months of extreme pain (which contributed to me having charges on other cards which I have fortunately been recovering)

I am not trying to be a zealot about this - I do understand that,as its a charge card BC dont make money on an unpaid balance, and that BC will argue that they normally lend money at, say, a 25% APR but my contention is that I was charged a penalty at that equated to an APR 42% and so at the very least I want the difference back!!

I may be on thin ice, but as they dont have any other penalty except this interest charge, I am hoping that is how I start my legal argument.

I am, at Glenn's advice, trying to get a copy of the T&C's in the hope that they use the word penalty!!

chorlton1 · 28th January 2007, 08:57

Amex, who structure their penalties for late payment in the same way but they call a spade a spade and dont call it interest, did settle with me in full.....

chorlton1 · 28th January 2007, 21:37

Have decided, in the absence of any advice to the contrary, to ask for it all back anyway and see what happens - total claim with with interest on the "interest" is north of £10k

I think a full refund hugely unlikely as that would mean they ran a sizeable debt interest free for some months and are happy to do so... so I am really punting for the difference between what they would have been able to charge me if this was an ordinary Barclaycard and they were charging "normal" interest, and what they did charge me on the Premier card as a "penalty" but called it interest.

At the very least my Prelim will shake the tree a little and I will get some idea where I stand, and it will give me time to source the original T&C's and check the language that surrounds the 3%.

If this looks like getting to court stage I may break it into 2 as the costs could be a bit hairy if I get this wrong on fast track (although it would be a great win!)

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