Can I Claim Back Charges From Credit Card Providers?
With all the publicity that has surrounded the returning of thousands of bank penalty charges to customers, the same rush to demand refunds for credit card charges is yet to occur. The principles for challenging credit card charges are the same as for bank charges but it is likely that many customers think that they cannot claim because of the current freeze on certain bank charge claims.
In anticipation of a test case ruling, the FSA have agreed a waiver that has given banks permission to put certain claims on hold. The waiver states that this consent is only for "providers of current accounts with overdraft facilities". This clearly does not include charges referring to credit cards so if you are not happy with a charge on your credit card statement and your card company fails to deal with your complaint satisfactorily, you may refer the matter to the Financial Ombudsman or to the courts.
There is a legal distinction between charges levied for breach of contract and penalty charges. Consumer law states that any charges levied must be proportional to the actual costs they incur. If you breach a contract, for example by making a late payment, the credit card company has the legal right to charge you and can enforce payment through the courts, providing the sum only reflects their costs incurred.
If the credit card company argues that the charge is for a service, they should also ensure that the sum charged is reasonable. The Office of Fair Trading made a huge difference to the number of complaints when it ruled in 2006 that £12 should be the maximum charge levied by a credit card company for defaults unless they could provide sufficient evidence that the costs they incurred were far greater.
When you accept a credit card, the agreement that you sign with a company is a legally binding contract, and when you do not meet the terms, such as making a payment beyond the agreed date or exceeding your credit limit for example, you are effectively in breach of contract and the courts can enforce payment. But if the sum charged is far greater than the likely costs incurred and therefore a penalty charge, this is not enforceable by the courts.
Most credit card companies will levy charges to customers for three particular reasons:
(1) Making a late payment
(2) Exceeding the agreed credit limit
(3) Returned payment (e.g. a cheque that bounced).
The charges you are likely to incur for each of these scenarios are detailed in the small print of your agreement and you will find them on your credit card statement amongst all your other transactions - if you generally have a long list each month, you may not notice them unless you check thoroughly. Credit card lenders are often more lenient on their charges than banks so it's always worth asking your issuer to reverse a penalty charge if you mostly make your payments on time, especially current times when card companies are keen to retain business.
Claims against credit card charges can go back six years, and you can request a comprehensive list of charges from your card issuer and their reasons for each, which they must provide within 40 days. You can also calculate the interest you have paid on the charges; there are online calculators available. If your card company asserts that the charges are for services, check your original agreement. You can ask for a copy from the lender if you no longer have it and if there are any changes to it that you were not made aware of then this can be used as evidence that you did not enter into such an agreement. You can then ask for a refund.
Your lender should respond to your refund request within two weeks. They may offer you a full refund, a partial refund or they might reject your request altogether on the basis that they do not agree with your findings. Some may even throw in a referral to the OFT bank charges test case as an excuse not to deal with your case but this does not apply to you; these tactics should not deter you if you truly believe you have been unfairly (or unlawfully) charged.
Where you struggle to achieve your desired level of refund, you may be forced to consider the small claims court, and even the threat of this can often force a lender to refund your charges. If this does not, you will now begin to incur costs of starting a small claim, but providing the amount does not exceed £5000, you will not be held liable for the lender's costs.