Credit Card News OFT Raises Serious Questions Over Store Cards 2997116
OFT raises “serious questions” over store cards
18 March 2004
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.
Today the OFT concluded that competition is prevented, restricted, and distorted in the supply of store cards to consumers and retailers.
“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.
£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.
Around 60 per cent of UK store card schemes are run by US firm GE Capital.
The OFT conducted 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.
The regulator also found that shops had problems with their card providers, finding it was hard to change supplier, and that contracts were long.
John Vickers, OFT Chairman, said: “Our study has concluded that there are serious questions regarding competition in the supply of store card services to retailers and in the supply of store card credit to consumers.
“The Competition Commission will now investigate further and can then decide on any necessary remedies.”
The OFT also called for an ‘honesty box’ outlining the interest rates, and the cost of only making the minimum payment to consumers.