The Office of Fair Trading has warned credit card companies in the UK that they must cut their penalty charges to customers who pay their bills late or they may face penalties themselves.

The OFT has written letters to eight unnamed banks that cover the majority of the credit card market in the UK, telling them that it has found the penalties of £20 to £25 charged when a payment is late or a credit limit is exceeded to be “excessive” and “unfair”.

The letters warned the banks that they have three months to either lower the charges or to address the concerns of the regulator in some other way, with the further warning that if the banks do not comply they will face court action to force them to do so.

Barclaycard, in confirming that they were one of the banks contacted by the OFT, said that they believe the fees they charge are fair and that customers can avoid them by simply paying their bills on time and not exceeding their credit limits, and it said that it has no plans to cut its penalty charges.

Other banks that service credit cards made similar arguments. Consumer groups hailed the OFT’s efforts but worried that if the fees are cut it could lead to higher interest rates.