It might have been eclipsed this week in the Budget afterglow but consumers had a big win in terms of the fees banks and credit card companies had been charging for late payment on credit cards.
 
The Commerce Commission found, what we had been saying for years, that late payment fees did not reflect the cost of collecting or incurring them – effectively that consumers were being gouged. Up until last year those fees were upwards of $20. In a release on Friday the commission said “it is unlikely that late payment fees in the range of $20 to $25 can be justified as reasonable”.

The banks and card companies had also said they used these fees to recover bad debt, but the commission said cardholders who ultimately made right their late payment should not be held liable for the costs and losses incurred by those customers who did not meet their payments.

The commission also rejected an argument that higher fees were a disincentive to customers incurring late payment charges, saying there was no evidence to support this.

Surprisingly (not) during the investigation a number of credit card issuers dropped their late payment fees to $15 or less, which the commission believes is justifiable as a cost recovery.

The industry is on notice that if the fees go higher, or if they have not already dropped to about $15 or less, the commission will consider action. Consumer agrees with this. Over-the-limit fees are still under investigation.

We also agree with the commission that people should shop around for the best deals. If a bank or credit card issuer has too high a fees don’t put up with it or them. Consumer regularly surveys credit card fees for the best deals, and we will be keeping a watchful eye on late payment fees and over-limit charges.

For more information see our credit cards report.

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