Article – Businesswire

May 21 (BusinessWire) – Credit card issuers have been making profits, recovering bad debts and loading irrelevant costs into credit card late payment fees as high as $25, the Commerce Commission concludes following an investigation into the rates …

Credit card issuers were profiting from late fees: Commerce Commission

May 21 (BusinessWire) – Credit card issuers have been making profits, recovering bad debts and loading irrelevant costs into credit card late payment fees as high as $25, the Commerce Commission concludes following an investigation into the rates charged by an array of major card issuers.

Late payment fees of $15 or lower were “likely to be justifiable on a cost recovery basis”, the commission said .

Its inquiries covered card fees charged by American Express, ANZ National Bank, ASB Bank, Bank of New Zealand, Kiwibank, TSB Bank, Westpac, and The Warehouse and found common late penalties were $20 to $25, although some had fallen to $15 thanks to competitive pressure.

Fair trading manager Graham Gill said the commission was “drawing a line in the sand” at $15.

We have advised the parties that any late payment fees at or below $15 should not trigger future investigation or enforcement action. Credit card issuers charging in excess of $15 may be liable to further action by the commission,” said Gill. “We expect any credit card issuers charging in excess of $15 to review these fees.”

At $20 to $25, credit card issuers “were generally generating profit in addition to recovering the actual costs of late payment by card holders,” a contravention of the Credit Contracts and Consumer Finance Act.

“Issuers have also used the late payment fees to recover bad debt. The commission does not believe that card holders who ultimately make right their late payment should be held liable for the costs and losses incurred through defaulting customers who never make good their debt.

“In addition, various costs appear to have been included in the fee which, in the commission’s opinion, are too removed from the act of late payment to be properly recoverable in this way.”

While some card issuers claimed a deterrent effect from slapping heavy fees on late payers, the commission said it had seen no evidence that this worked.

(BusinessWire)

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