 In 2006 the Office of Fair Trading found that the banks were exploiting penalty bank charges on credit cards and has suggested that banks restrict such penalty to a maximum of 12 UK pounds.Penalty charges or Liquidated damages are illegal in UK contract law unless they represent the real cost of a breach of contract incurred through an unauthorised overdraft level or bounced cheque.This ruling by the OFT had been taken by many customers to extend to their personal bank accounts and subsequently the UK small claims court system was flooded with cases of customers reclaiming these ‘illegal’ penalties.