A High Court judge said yesterday two major banks and a finance company charged customers 'extortionate' interest rates for credit card and personal loans. Mr Justice David Yam Yee-kwan made the attack as he outlawed the practice that allows credit card and finance companies to claim full legal costs and expenses from customers with outstanding debts. He ruled the clause which stated that consumers shall be responsible for all costs and expenses incurred when enforcing the agreement or recovering debts was unreasonable and unfair. Mr Justice Yam dismissed the appeals brought by Hang Seng Credit Card, Standard Chartered Bank and Pacific Finance (Hong Kong) to overturn the fixed cost order made by a High Court Master in December last year. The judge ruled the banks and the finance company were not entitled to the reimbursement, including without limitation the charges of any agent, from eight customers who had failed to repay loans on time. 'In the natural and ordinary meaning of this cost provision, it can extend to all costs and expenses [not just legal cost] even unreasonably incurred. There is no upper limit. Such a clause is capable of being applied unconscionably. It just leaves the consumer to the mercy of the other party,' he said. 'I consider that the cost provision is unconscionable under the Unconscionable Contracts Ordinance and is therefore unenforceable.' In his written judgment, Mr Justice Yam said the companies could act harshly and unreasonably, such as by using their associate companies to run up direct or indirect administrative charges or by going to the most expensive debt collecting agency. He said according to a study by the Consumer Council, the collection charges can amount to 25 per cent to 30 per cent of the debt. The judge said consumers had little or no choice over the terms contained in the contracts, let alone understanding the effect and consequences of such a clause, which is capable of being applied unfairly. He said the terms and conditions were often printed in fine print that discouraged reading. 'In short, the consumer has no real choice. Services are supplied on a take it or leave it basis. Credit card companies are able to dictate terms which can operate harshly against the consumer.' Mr Justice Yam also hit out at the hefty interest rate charged by the three companies, which was one of the factors that rendered the cost provision unconscionable. He said: 'Another consideration in these cases is that the interest charged was extortionate.' In one case, the annual interest rate charged by Pacific Finance amounted to 59.65 per cent while the credit card annual interest rate charged by Hang Seng Bank was 24 per cent per year. The legal rate of interest on lending cannot by law exceed 60 per cent. Consumer Council chief executive Pamela Chan Wong-shui said she was pleased with yesterday's ruling and said it was a very important case. 'We are not encouraging customers not to repay their loans but it has to be done in a fair and reasonable way,' Mrs Chan said. 'Banks and finance companies have to let consumers know about the various terms and conditions as early as possible and make the business more accountable to customers.' She said the council would hold meetings with banks and finance companies to discuss their future practices. Hang Seng Bank and Pacific Finance yesterday refused to comment and said they would seek further legal advice. Standard Chartered Bank could not be reached for comment.