Credit Card News Watchdog Clamps Down On Costly Store Cards 17062762
Watchdog clamps down on costly store cards
08 March 2006
The watchdog confirmed that there is a general lack of competition in the market for the cards, with little pressure on companies to reduce their cards’ annual percentage rates (APRs) from the 30 per cent mark that many charge.
The commission has therefore reached a decision to impose a number of measures on those operating in the field, including, most notably, a clear warning where an APR is over 25 per cent that there are cheaper sources of credit.
These warnings will appear on monthly statements, which will also have to provide clear information about the card’s interest level, associated fees and charges.
Overall, more than 90 per cent of current cardholders are paying an APR in excess of 25 per cent, while the commission estimates that the average store card APR is between 10 and 20 per cent too high than is reasonable.
As there are also over 11 million store cards with a collective outstanding balance of more than £2 billion, the commission is also ordering providers to give customers the opportunity to pay off their entire monthly balance by direct debit.
Using data largely relating to the period 1999 to 2003, the commission calculated that 57 per cent of store cardholders took on interest charges rather than paying their monthly balance in full.
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