Almost half a million credit and store card holders are to receive compensation, following an investigation into the small print presented to customers.
The Office of Fair Trading (OFT) found 17 lenders guilty of providing terms and conditions which don’t comply with the Consumer Credit Act (CCA).
These lenders, which have not been publicly named, will now have to return any interest or arrears charges made whilst their documents were inadequate.
It has been estimated that around £149 million worth of compensation will be issued.
Know Your Rights: What is the Consumer Credit Act? – learn what protection this act offers.
Lenders to contact customers affected by breach
Some of the breaches date back as far as 2008, meaning certain customers could potentially receive quite a windfall.
All of the banks and building societies involved have pledged to contact customers directly to let them know about any charges that will be returned.
Customers who have been charged interest or arrears fees on a personal loan could also be in line for compensation.
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Which? wants the OFT to name and shame
Which? executive director Richard Lloyd said: ‘It’s good to see the OFT taking this action but they should name and shame the 17 lenders involved so that customers are aware that they might be due compensation. We’d also like some assurances about how lenders will contact people who were affected but are no longer their customers.
‘We want regulators to clamp down on excessive fees and charges so that borrowers are treated fairly whatever form of credit they’re using.’
Reacting to the investigation, OFT senior director for consumer credit, David Fisher refused to accuse the lenders of deliberately exploiting their customers. He said: ‘These issues were not deliberate misconduct, but the institutions concerned should have ensured they were complying with the law.
‘The OFT welcomes the proactive steps taken to return money to customers where it was incorrectly charged.’
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