Store cards criticised for "lack of transparency"
18 March 2004
Stores around Britain have been accused of encouraging consumers to take out cards without explaining the facts about the high rates of interest they charge.
The Office of Fair Trading, as the competition watchdog, said it had "serious questions" about store cards, and referred the matter to the Competition Commission.
Research that found just 23 per cent of shoppers were offered the chance take an application form away with them. Of the remainder, three quarters had a request to do so refused. Additionally, information on the interest rate was not available in about a third of cases.
"There is a lack of transparency at all stages of the process of providing consumer credit through store cards - before signing, at point of sale, and post-contract," the regulator said.
The OFT also called for an 'honesty box' to go on application forms and bills which explains the cost of only making the minimum payment to consumers.
The OFT was asked to investigate the lucrative market, following an inquiry into store cards by the House of Commons' Treasury Select Committee, which alleged that many schemes charged exorbitant interest rates and concealed this information from consumers.
The Treasury Committee accused some stores of "highway robbery" and "fleecing" card holders.
£4.8 billion is spent on store cards each year. There are 22.85 million active store cards in the UK and 18.6 million accounts.
In response to the findings, Phil Evans, principal policy adviser at the Consumers' Association, said: "The investigation has clearly shown that the store card market doesn't function in the best interests of consumers."
"Store card rates have stuck at an average of around 28 per cent for the last few years. They have not tracked the general decline of credit card and loan rates and seem to be immune from competition within the wider market for credit. The lack of discipline imposed by the credit market on store cards is concern enough to trigger an inquiry."