CASE in talks with banks to review credit card penalty fees
by admin , March 11, 2010, 1715hrs
By Samantha Kudus
email@corporateobserver.com.sg
SINGAPORE (March 11, 2010) - As the United States government moves to limit credit card penalty fees for late payments, questions are also being raised here in Singapore over whether banks are justified in imposing such charges.
A number of readers recently wrote letters to the Straits Times forum on what they see as banks double charging credit card consumers. After all, banks are already charging interest on consumers who are late in paying their bills.
And the Consumer Association of Singapore (Case) are in talks with the banks to review the charges, The Corporate Observer has learnt.
For late payments, UOB and OCBC charge flat fees of S$50 and S$55 respectively.
DBS waives the penalty fee for bills that are less than S$50; it imposes a charge of between S$10 and S$55 for late payments on bills exceeding S$50, depending on the balance.
Incidentally, legislation to limit credit card penalty fees has been gathering pace in the US.
On Wednesday, the US Federal Reserve submitted a series of proposals, which are expected to take effect in August. Among the biggest changes in the Fed proposal was capping penalty fees to no more than the dollar amount of the violation.
For example, card issuers would be banned from charging a US$39 fee when the card holder is late in making a US$20 minimum payment. In such a case, the late fee would be limited to US$20, to be paid in addition to the minimum payment.
"The rule would prevent credit card issuers from charging large penalty fees for small missteps by consumers and would require issuers to re-evaluate rate increases imposed since the beginning of last year," Federal Reserve Governor Elizabeth Duke said in a statement.
Former NTUC Income CEO Tan Kin Lian, an advocate for consumer rights, reiterated that bank charges in Singapore “are excessive relative to the marginal cost of the service provided”.
With banking “now becoming an essential part of life and is no longer a luxury”, Mr Tan argued: “Banks already charge credit card consumers an annual fee and an interest rate, they should not be allowed to make a profit from penalizing others... (the banks) seem to operate like a cartel in levying hefty charges to boost their profits.”
Among the banks contacted by The Corporate Observer, only OCBC Bank responded on the issue.
Ms Alice Goh, who heads the credit cards department at OCBC, pointed out that its credit card customers “enjoy up to 55 interest-free days before they have to pay their bills”.
Stressing that the late payment charges were “clearly communicated to our customers”, Ms Goh said: “Late payment charges are levied when customers do not adhere to the discipline of paying their bills on time. When a customer is late in his payment, he is also charged interest on the outstanding loan as he would have exceeded the interest-free days extended by the bank.”
While the Association of Banks in Singapore (ABS) could not be reached for comment, Mr Seah Seng Choon, Case executive director, told The Corporate Observer that the consumer rights group has been working with ABS to "encourage" banks to review the “exorbitant and unnecessary” charges.
Mr Seah would not say how long the discussions have been going on but he acknowledged that the issue had been “long-standing”.
“We are not expecting any substantial changes in such a short period of time,” he added.
Still, Mr Seah said that in this instance, consumers are going in with their eyes open. He said: “(The charges) are stated in the contract, consumers should read their terms and conditions before signing on.”
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