The Government's Office of Fair Trading has written to eight credit card companies ruling that the charges they impose on customers for making late payments are "excessive".

After completing its investigation into late payment or "default charges" imposed by credit card companies, the OFT said the eight providers now had three months to charge their practices or "otherwise address the concerns it has raised".

The OFT said that it was not allowed by law to name the excessive chargers, but pointed out that it had focused it attentions on the leading credit card issuers that between them have a dominant share of the market.

The OFT today highlighted charges of £20 to £25 that borrowers have to pay if they fail to pay the credit card bill by the due date, exceed their credit limit, or pay by a cheque that is bounced by their bank.

"The OFT believes that 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," the OFT said.

"The OFT considers that, in a consumer contract, a default charge is likely to be disproportionately high if it is more than a genuine pre-estimate of the damages that the card issuer would win in court if it sued the cardholder for breach of contract," it said, adding: "The OFT's provisional view is that the levels of the default charges imposed by the credit card companies need to be reduced in order to be fair," the Office of Fair Trading said.

The OFT said that, although the card providers had co-operated with its investigation, they had stuck to their line that their "charge provisions are fair".

The OFT, which said today that credit was one of its five priority sectors, has the power to take enforcement action throught the courts if necessary to protect consumers.

While it cannot force a card company to reduce its charges, the OFT can take individual cases to court to try to establish a ruling that the contract terms are unfair and hope as a result to set a precedent for the charges.

The credit card providers have long been accused of levying excessive charges from their borrowers. In their defence, they argue that the market is fiercely competitive and profits per customer are waifer thin.

A Treasury select committee of MPs has already told the OFT to tighten up its rules governing credit card advertising and an investigation is underway into the competitiveness of store-branded credit cards.

Matt Barrett, the former chief executive of Barclays, famously told MPs that didn't use credit cards because they were "too expensive".