In order for a charge to be considered fair under the UTCCRs and not be punitive, it must be limited to the type of costs which would be legitimately claimed against the consumer if the credit card company were to sue the consumer individually. These claims must not include costs which could not be recovered due to not qualifying as actual damages or they would have not been actually caused by the default.

 

This is where the banks really got into hot water. You see, any provision of the banks contract which would be unable to be viewed as fair under the UTCCRs would not be enforceable if it forces the consumer to pay a penalty fee which contains an unjustly high amount as a penalty above what the fair and reasonable charges would be for the actual event.

 

The OFT has also provide clear guidance on how they feel a fair default fee should be calculated. They said that a fair default charge should:

 

  1. be calculated on the basis of a reasonable pre-estimate of the net limited additional administrative costs which occur as a result of the specific breaches of contract and can be identified with reasonable precision.
  2. reflect a fair attribution of those cost between defaulting consumers.
  3. be based on genuine estimate of the total numbers of expected instances of default in the relevant period, and
  4. treat costs other than those net limited additional administrative costs as a general overhead of the credit card business and disregard them for the purpose of calculating a default fee.

 

What we do know is that a legitimate cost charged consumers may include the estimated costs of sending a default letter, direct costs attributed to dealing administratively with all defaults, a portion of general overhead expenses as long as the bank would not have had to incur those expenses if a default had not occurred.

 

Based on the above information some consumers have been successful in obtaining large refunds for unfair bank credit card penalty charges.

 

Extrapolating the same principles to other bank charge, such as late and over limit fees on current accounts, consumer are pushing for refunds of those charges as well that they claim to be unfair and recoverable.