Eight credit card providers have been warned by the market watchdog about the amount they charge in late fees.The Commerce Commission said fees of $20-$25, the amount some banks charged for late fees last year, were “unreasonable” and $15 was
Eight credit card providers have been warned by the market watchdog about the amount they charge in late fees.
The Commerce Commission said fees of $20-$25, the amount some banks charged for late fees last year, were “unreasonable” and $15 was more reasonable.
‘Exception fees’ –the amount banks charge for credit card payments that are late or on accounts that run over the limit – have been under Commerce Commission investigation.
Compliance letters have been sent to eight banks or credit card providers under investigation include American Express International, ANZ, ASB, BNZ, TSB, Westpac and The Warehouse Financial Services.
The Commission said exception fees in the range of $20-$25 dollars generated profits over and above the cost banks incurred when a customer made a late credit card payment.
As well as breaching the Credit Contracts and Consumer Finance Act, the Commission said late payment fees were also being used by credit card issuers to recover bad debt.
“The Commission does not believe that card holders who ultimately make right their late payment should be held liable for the costs and losses incurred through defaulting customers who never make good their debt.”
During its investigations a number of the credit card issuers voluntarily dropped their late fees to less than $15 due to market changes in New Zealand and similar changes in fee structures in Australia.
The Commission’s Auckland fair trading manager Graham Gill said it had sent compliance advice letters to the eight banks, even though the voluntary reduction in fees to $15 had enhanced competition in the market.
“We are also drawing a line in the sand. We have advised the parties that any late payment fees at or below $15 should not trigger future investigation or enforcement action,” he said.
“Credit card issuers charging in excess of $15 may be liable to further action by the Commission. We expect any credit card issuers charging in excess of $15 to review these fees.”
The investigation into late payment fees has now concluded, while the investigation into over-limit fees continues.
