8 March 2006
A final report on store cards released by the Competition Commission (CC) has been described as "disappointing" by both the National Consumer Council (NCC) and leading independent credit card comparison service uSwitch.
The CC's report has stated that annual percentage rates (APRs) were on average 10 to 20% too high and this is costing consumers at least £55 million a year, and "maybe significantly more".
As a solution it has ruled that store card credit providers must warn cardholders on monthly statements that cheaper credit may be available elsewhere (if APR is above 25%); give more and better information on all monthly statements; offer option to pay by direct debit; and offer payment protection insurance separately from other elements of store card insurance
However, Nick White, head of personal finance at uSwitch.com, said: "The Competition Commission has missed a big opportunity here to overhaul the store card market
"The Commission's ruling that store cards must display a prominent warning on monthly statements if the APR is above 25% is the equivalent of closing the stable door after the horse has bolted.
"Consumers need to be made aware of the exorbitant rates charged by some store card providers at the time of signing up to the deals, so that they go in with their eyes wide open."
National Consumer Council deputy director of policy, Claire Whyley, echoed Mr White's comments. "We are extremely concerned that the commission's proposed remedies won't get to the heart of the problem," she said.
"NCC is highly sceptical that warnings about cheaper credit and better APR information on customer statements will do much to lower charges. The Commission itself has acknowledged that consumers are not sensitive to store card APRs.
"This is a market that's been seriously failing consumers for a long time. Expecting consumer behaviour, alone, to make it work is letting the industry off the hook."
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