Thread: EGG overlimit charges

I've just realised I've been paying the last few month for over limit charges £16 at a time. I've just sent them an email remind them that the maximun the can charge is £12.

I can't believe they still change more than they have been told to do. Can I complaint to the OFT for not following their regulations?

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I sent them a copy of the ruling of the OFT:

Newsroom
Press releases 2006
Current credit card default charges unfair
OFT sets threshold for intervention

68/06 5 April 2006

Credit card default charges (see note 1) have generally been set at a significantly higher level than is legally fair, said the OFT today. The OFT estimates that across the industry this has led to unlawful penalty charges currently in excess of £300 million a year.

Download Calculating fair default charges in credit card contracts (203 kb).
Download guide for consumers (64 kb).

The OFT now expects all credit card issuers to recalculate their default charges in line with the principles set out in a statement published today and to take urgent action where needed to reduce the level of credit card default fees. The industry has until 31 May to respond to the statement. These principles also apply to default charges in other consumer contracts such as those for bank overdrafts, store cards and mortgages.

Where credit card default charges are set at more than £12, the OFT will presume that they are unfair, and is likely to challenge the charge unless there are limited, exceptional business factors in play. A default charge is not fair simply because it is below £12. Setting a threshold for intervention is a pragmatic pro-consumer action that is designed to give the industry the opportunity to change its practice without litigation. It is supported by detailed guidance to the industry as to how to reduce the likelihood of public enforcement (see note 2).

A default charge should only be used to recover certain limited administrative costs. These may include postage and stationery costs and staff costs and also a proportionate share of the costs of maintaining premises and IT systems necessary to deal with defaults (see note 3). Exceptional business factors which may affect the level of a fair charge may include policies to prevent casual defaults as operated by issuers such as Egg (see note 4).

Only a court can finally decide whether a charge is unfair or not. The OFT has today set out a statement of its view of the law. This has not generally been accepted by most of the eight credit card issuers.

John Fingleton, OFT Chief Executive, said:

'Our statement of principles provides practical guidance to banks which increases their incentives to compete vigorously while protecting consumers from being charged unfair amounts. Our threshold approach is a spur to changes in market practice. We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively.'

NOTES

1. These are charges in standard credit card contracts for a failure to pay a minimum payment on the due date, exceeding a credit limit or a failure to honour a payment made.

2. This reflects the OFT's duty to target its resources on serious consumer detriment as a priority over cases involving less harm to consumers. Card issuers are required to confirm their response to the OFT statement by 31 May 2006.

3. A fair default charge should not exceed a reasonable estimate of certain limited administrative costs which the credit card issuer reasonably expects to incur as a result of default.

4. The OFT is not proposing that default fees should be equivalent to the threshold, and a court will certainly not consider that a default fee is fair just because it is below the threshold. Where there are exceptional business factors, so that the presumption that a default charge over £12 is unfair is not applicable, this does not necessarily mean that the current level of the default charge is consistent with the OFT's interpretation of the requirements of unfair contract terms legislation. But for example, where a card issuer has a policy of requiring customers to pay minimum monthly repayments by direct debits, such as that operated by Egg, and offers credit cards only to customers that satisfy a relatively high scoring requirement it may be able to set a fair default fee at a level above the threshold.

5. The OFT has published a short guide for consumers and consumer advice agencies setting out the principles on which default charges should be calculated. This can be downloaded above.



Let's see what they offer and them I'll take a decision.....

This is their answer, you were right they were going to pull it on the special dispensation from the OFT:

Dear XXXXXXI'm sorry you feel this way regarding your Egg Card account, I've logged your dissatisfaction regarding this on our internal complaint recording system, the reference for this isPlease copy and paste the below link into your web browser address bar for further information on the Office of Fair Trading ruling on bank charges. A summary is below.www.oft.gov.uk/news/press/2006/130-064. The OFT is not proposing that credit card default charges should be equivalent to the threshold, and a court will certainly not consider that such a charge is fair just because it is below the threshold. Where there are exceptional business factors, so that the presumption that a credit card default charge over £12 is unfair is not applicable, this does not necessarily mean that the current level of the charge is consistent with the OFT's interpretation of the requirements of unfair contract terms legislation. But for example, where a card issuer has a policy of requiring customers that satisfy a relatively high scoring req.Should you need any further assistance please contact us ether via secure message, or via our contact centre on 08451 233 233. This line is open 24 hours a day, 7 days a week.Thanks for your message.RegardsJohn DaviesInternet Customer Services

-----Original Message-----


Date: 18 Mar 2008
Time: 19:03
Subject: Overlimit charges

Dear Sirs,I have noticed that you have charged me for the last 5 months £16 for being over my credit limit. I have to advise you of the ruling by the OFT regarding this charges which states that this cannot be higher than £12 at a time. You may be interested in the following:NewsroomPress releases 2006Current credit card default charges unfairOFT sets threshold for intervention68/06 5 April 2006Credit card default charges (see note 1) have generally been set at a significantly higher level than is legally fair, said the OFT today. The OFT estimates that across the industry this has led to unlawful penalty charges currently in excess of £300 million a year.Download Calculating fair default charges in credit card contracts (203 kb).Download guide for consumers (64 kb).The OFT now expects all credit card issuers to recalculate their default charges in line with the principles set out in a statement published today and to take urgent action where needed to reduce the level of credit card default fees. The industry has until 31 May to respond to the statement. These principles also apply to default charges in other consumer contracts such as those for bank overdrafts, store cards and mortgages.Where credit card default charges are set at more than £12, the OFT will presume that they are unfair, and is likely to challenge the charge unless there are limited, exceptional business factors in play. A default charge is not fair simply because it is below £12. Setting a threshold for intervention is a pragmatic pro-consumer action that is designed to give the industry the opportunity to change its practice without litigation. It is supported by detailed guidance to the industry as to how to reduce the likelihood of public enforcement (see note 2).A default charge should only be used to recover certain limited administrative costs. These may include postage and stationery costs and staff costs and also a proportionate share of the costs of maintaining premises and IT systems necessary to deal with defaults (see note 3). Exceptional business factors which may affect the level of a fair charge may include policies to prevent casual defaults as operated by issuers such as Egg (see note 4).Only a court can finally decide whether a charge is unfair or not. The OFT has today set out a statement of its view of the law. This has not generally been accepted by most of the eight credit card issuers.John Fingleton, OFT Chief Executive, said:'Our statement of principles provides practical guidance to banks which increases their incentives to compete vigorously while protecting consumers from being charged unfair amounts. Our threshold approach is a spur to changes in market practice. We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively.'NOTES1. These are charges in standard credit card contracts for a failure to pay a minimum payment on the due date, exceeding a credit limit or a failure to honour a payment made.2. This reflects the OFT's duty to target its resources on serious consumer detriment as a priority over cases involving less harm to consumers. Card issuers are required to confirm their response to the OFT statement by 31 May 2006.3. A fair default charge should not exceed a reasonable estimate of certain limited administrative costs which the credit card issuer reasonably expects to incur as a result of default.4. The OFT is not proposing that default fees should be equivalent to the threshold, and a court will certainly not consider that a default fee is fair just because it is below the threshold. Where there are exceptional business factors, so that the presumption that a default charge over £12 is unfair is not applicable, this does not necessarily mean that the current level of the default charge is consistent with the OFT's interpretation of the requirements of unfair contract terms legislation. But for example, where a card issuer has a policy of requiring customers to pay minimum monthly repayments by direct debits, such as that operated by Egg, and offers credit cards only to customers that satisfy a relatively high scoring requirement it may be able to set a fair default fee at a level above the threshold.5. The OFT has published a short guide for consumers and consumer advice agencies setting out the principles on which default charges should be calculated. This can be downloaded above.I hope you amend the records in my account accordingly and apply the ruling of the OFT. Regards,Julia Jimenez

Just a quick comment that I keep thinking about when the argument about their actual cost arises;

Last year the banks started saying that if they couldn't charge their high "default" charges, it could mean the end of Free Banking, however, if they can't profit from breaches of contact then surely, if they are forced to charge their actual cost then its not going to make a difference other than their profit margin, which in effect they are admitting that the charges are making them huge profits to pay for banking?

If that makes sense!?

Tom

Wow Mistermind, I didn't know that, but its a great point - how can one bank justify over £30 (my Natwest charged me 2x £38 yesterday for bouncing 2 DD for £5 each!) then like you said a few yards down the road £3 is what they consider their fees!?
Is paper, computers & wages that much cheaper in Ireland!?

Its yet another tick of my list of why to move to RoI - along with much nicer people, beautiful countryside & a good pint!

Tom