March 15, 2007

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  NEWS: Companies Fight to Make Up for Brit Fee Cap

  Credit card companies catering to British consumers may have lost the battle over default fees when the Office of Fair Trading imposed a cap on the amount that can be charged, but there is evidence that they are ready to wage war – by jacking up virtually every other fee allowed, on top of creating new ones. In just the last two weeks, six of Britain's biggest card providers have changed some or all of their cards being offered. These shifts range from cutting interest-free periods to raising interest rates on cash advance fees by as much as a full 10%.
  
  The cash advance penalties were, perhaps, the most dramatic motion across the board. Cash advances have always been costly transactions, but never more so than currently. Not only have interest rates on these transactions shot up, but some banks are adding withdrawal fees, to suck even more money out of the deal. Lloyd's TSB, for instance, has raised its cash advance interest fee to a whopping 27.948%, while competitor GE Money has leaped to 25.517%, with a 0.5% jump to its pre-existing withdrawal fee. Furthermore, lots of issuers are adding covenants or exceptions to its promotional deals, including the previously universal interest-fee periods for new accounts. Lloyd's has added the provision that, to qualify for its "no interest for 9 months" deal, one must make a minimum purchase of £100 in the first three months.
  
  Experts are predicting that the newest fee hikes may ultimately impact consumers in a worse fashion than the now-outlawed default fees did, saying that the OFC seems to not realize what the repercussions are of the fee cap. The office is slated to examine bank overdraft fees next, and consumer groups are warning that any new legislation should include a proviso disallowing any retaliatory fee gouging.
  
  
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