OFT called on to close £38m loophole

Interest charge takes default charge above £12 cap Oversight will hit Britons who can least afford it

Credit card users who suffer a £12 default charge are being hit by a loophole not spotted by the Office of Fair Trading.

Research by Europe's leading price comparison website moneysupermarket.com has found banks and building societies are charging interest on that £12 fee, if users don't pay their next month's balance in full.* Rob Kenley, head of credit cards at moneysupermarket.com, said: "In effect, the addition of interest is taking the default charge above the limit imposed by the OFT.

"The majority of banks have always added interest to default charges, so the OFT should have stipulated this practice had to stop.

"We recently conducted a YouGov poll** that showed over 20 million credit card default charges were levied in the past year.

Typically, over the course of a year, that £12 charge would have £1.91 in interest added to it, equating to over £38 million going from our pockets into bank profits." The survey also found 13 per cent of British adults paid at least five default charges last year equating to a total of 1.35 million people.

Rob Kenley said: " It is the poorest consumers who will typically default, and they need the OFT to be on top of its game at all times.

It should be commended on its work for consumers but this is a wake-up call to it to work even harder.

"There is not only a principle at stake here but also £38 million of our hard earned cash.

The OFT needs to act swiftly to close this unfair loophole." Notes.

* Over the course of a year, on an average rate of 15.9 per cent, the £12 charge would attract £1.91 in interest; so taking the cost to the consumer close to £14.

The YouGov poll of 2,116 adults representative of the British adult population of 45.25 million (interviewed between June 19 and 21, 2007) found 23% of respondents were hit with at least one credit card default charge in the previous 12 months, which equates to 10,407,500 people.

Of those 10,407,500 people: 44% suffered one charge (4,579,300 charges).

22% were hit with two charges (4,579,300 charges).

7% had three charges (2,185,575 charges).

5% had four charges (2,081,500 charges).

13% had at least five charges (at least 6,764,875 charges).

This equates to at least 20,190,550 charges being levied.

** The research was conducted between June 19 and 21, 2007.

YouGov interviewed a sample of 2,116 people representative of all adults in Great Britain.

The survey was carried out online.

Results were weighted to be representative of the known population profiles from the 2001 Census.

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