Credit card providers were yesterday ordered to cut the "excessive" charges imposed on customers who fail to pay their bills on time.
The Office of Fair Trading (OFT) has asked eight major credit card firms to respond to its provisional view that charges of around £20 to £25 are unfair.
The regulator has imposed a three-month deadline on the companies to address its concerns or face the threat of court action to protect consumers.
In addition to failing to pay bills by their due date, card holders can be penalised for going above their credit limit or because they have missed payments when cheques or direct debits have not been honoured.
The OFT said: "It is unfair for the purposes of contract terms regulation to require a consumer who defaults in one of these ways to pay a disproportionately high charge."
Charges are considered by the regulator to be excessive when they are more than a "genuine pre-estimate" of the damages that a card issuer would win in court if it sued for breach of contract.
Their level should reflect occasions when there is no attempt to defraud the credit card company and holders may have missed payments because of a lapse of memory, an OFT spokesman said. The OFT said the firms had cooperated with its investigation of socalled "default charges", which has been taking place since October 2003.
The issue has also been considered by the Treasury Select Committee, but the credit card firms have stated their belief that the default charges are fair.
In its statement, the OFT said it has explained to the credit card providers why it does not accept their view and has given them three months "to provide suitable undertakings or otherwise to address the concerns it has raised".
And it warned: "The OFT has powers to take enforcement action in the courts if necessary to protect consumers."
Barclaycard has pledged to cooperate fully with the OFT investigation.
But it said there were no plans to lower its charges of £20 for a late payment or £20 if cardholders exceed their credit limit.
A spokeswoman for Barclaycard said: "It must be remembered that these fees are easily avoided if people make payments on time and stay within their credit limit and within the terms and conditions of the contracts that they signed."