£400m card rip-off

BANKS and credit card companies are creaming more than £400m a year off the British people through extortionate late payment and credit limit charges. Consumer watchdog Which?, formerly the Consumers' Association, said one in four consumers were charged in 2004 for late payments or going over their card limit.

Most lenders charge between £20 and £25 for late payments, which the organisation claims is excessive because late payment letters are automatically generated and penalty charges added to the next bill. In a scathing attack on the financial services industry, Which? also accused lenders of raking in at least £1bn a year through loan payment protection insurance for personal loans. It said the insurance is often mis-sold and offers limited cover.

It added lenders regularly target vulnerable consumers to encourage them to rack up debt. Which? spokesman Malcolm Coles said: 'The credit industry has an alarming number of tricks up its sleeve to wring every last penny it can out of its customers. Lenders seem to have no qualms about persuading people to take on more debt than they can afford and they will carry on doing it as long as they can get away with it.' He said the Consumer Credit Act should be reviewed to include tougher measures on interest calculation methods and data sharing.

The Association for Payment Clearing Services, which represents banks and lenders, dismissed the organisation's claims, insisting the industry had done much to clean up its act since 2003.

Spokeswoman Sandra Quinn said: 'If they had said this 18 months ago then we would have held our hands up, but the industry has improved since then.' Quinn said the introduction of summary boxes on financial products and health warnings on credit card statements had aided borrowers. She added that new guidelines governing the distribution of credit card cheques and credit limit increases are due to come into force.

The British Bankers' Association said it is not in the banking industry's interest to encourage people to over-stretch themselves.