Credit Card News DTI Slammed For Card Inaction 2997148
DTI slammed for card inaction
01 July 2004
The DTI released new proposals this week which would not require lenders to use a standard formula when calculating interest charges.
Such a scheme would have allowed customers to compare charges on different cards when making a decision.
At present, lenders can calculate interest charges as they see fit. According to the Consumers’ Association about ten different methods are currently employed with the result that the actual charges paid on cards with identical APRs can differ by as much as 76 per cent.
Mike Naylor, of Which?, said it is “virtually impossible for even the most sophisticated consumers to compare cards.”
Yet the DTI has only opted to enforce a summary box. This would provide information about the method of calculation, intended to inform consumers about the price of borrowing on a card.
It has not decided to standardise the calculation method when the rules on APRs are changed in October – a move criticised by the Consumers’ Association.
The chairman of the Treasury Select Committee, John McFall, believes: “Further work needs to be done. If there is a box where the information is meaningless . . . customers will still be left completely in the dark.”
The DTI argued that standardising interest charges could inhibit competition between lenders.
But Nigel Beard, another member of the committee, was hardly impressed with this response: “How can there be competition when it is not clear what the calculation is? I am surprised that the department has been sucked into this silliness”