If you have taken out a credit card it is very likely you may, at one time or another have incurred some kind of penalty charge after making a late payment or accidentally exceeding your agreed limit. In 2006 The Office of Fair Trading looked into the level of charges. It was discovered the charges applied were often too high and unfair and, as a result, unhappy customers could now start reclaiming bank charges from Barclays and other lenders.

Prior to 2006 some lenders were charging up to £35 every time a customer made a late payment or accidentally exceeded a limit regardless of whether they exceeded their limit by only a small amount or only missed their payment date by one day. Lenders tried to justify these charges by claiming they were necessary to cover the costs of administration. The Office of Fair Trading dismissed this claim and decided that any charge over £12 would be regarded as unfair.

The change was welcomed by most customers, but many were still angry that they had been forced to pay high fees for many years that had now been deemed unfair. As a result, there was an upsurge in people reclaiming bank charges from Barclays.

The other scandal which affected credit card providers in 2006 was the mis-sale of payment protection insurance (PPI). Another investigation by The Office of Fair Trading and The Financial Service Authority found extensive problems throughout the PPI industry. Many lenders were accused of failing to introduce adequate processes to prevent customers from mis-sale and of providing inadequate staff training. These factors combined meant that potentially thousands of PPI policies had been mis-sold.

Payment Protection Insurance is huge business for lenders bringing in £5.5 billion a year. Prior to 2006 the insurance had often been seen as an appealing and lucrative additional revenue stream for lenders. It frequently earned lenders more than the interest from the loans and credit cards to which it was attached. The reason for this was, at least part, due to the fact that the payouts against the insurance were so low. A 2008 investigation by The Competition Commission found that of all the customers who tried to use their credit card PPI as little as 11% were successful. The figure for loan protection insurance was little better at 15%. This meant that for every £100 spent on credit card PPI the lender could potentially make £89 profit!

A significant reason why the level of payouts was so low so connected to the fact so many policies had been mis-sold. Many customers had been offered and taken out the insurance who, quite simply, were ineligible to use it. This included people with pre-existing medical condition, customers over the age of 65 or those who were self-employed as the majority of policies do not offer cover to people in these categories. You may also have been mis-sold you if you were misled by the salesperson or put under undue pressure to sign up for the cover.

If you are interested in reclaiming bank charges from Barclays or making a claim for mis-sold PPI call us today on 0207 471 2000.

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