Row over store card default fees

The OFT ordered a cut in credit card default fees in 2006

A store card issuer has cut its charges for people making late payments or going over their credit limit after an approach from trading authorities.

Clydesdale Financial Services, owned by Barclays, has cut its default fees from £22.50 to £12.

But the group, which produces some store cards for High Street retailers, disagreed with the Office of Fair Trading over the basis of the decision.

The OFT launched a crackdown on credit card default fees in 2006.

Customer complaints

Clydesdale Financial Services provides store cards on offer at retailers such as photographic specialist Jessops, fashion store Viyella and Scottish Hydro Electric.

In April 2006, the OFT said that credit card default charges had been set at an unfairly high level industry-wide and ordered that default charges be cut across the board to £12.

It added that the rules should also cover some other products such as store cards.

Prompted by a customer complaint, the OFT made its first approach to an individual provider, rather than the industry as a whole, leading to Clydesdale Financial Services reducing its charges as of Tuesday.

Strong words

However, the provider defended its fees as "transparent, legal and wholly avoidable".

This is a great result for consumers Mike Haley, Office of Fair Trading

"The company disagrees strongly with the OFT's legal analysis and conclusions but has decided to make the change, following discussions with the OFT, to remove uncertainty and create clarity for customers," it said under its new name, Barclays Partner Finance.

The OFT said it would not be taking any further action following the cut in charges.

"This is a great result for consumers," said Mike Haley, OFT head of consumer protection.

Refund push

Consumer group Which? said that in terms of fairness for consumers, store cards should come under the same rules as credit cards.

Phil Jones, personal finance campaigner at Which?, advised anyone who had been charged at £22.50 since April 2006 to contact Clydesdale Financial Services to bid for a refund.

He suggested that store cards were "almost always a bad deal" for consumers who did not pay off their balance every month, as charges were often higher than with best buy credit cards.

Campaigners have been calling on the OFT to be stricter in policing their 2006 rules on default fees.