Have Store Cards Got Our Best 'Interest' In Heart?
Store card statements should carry warnings to alert consumers to the high interest rates charged by lenders, the Competition Commission has said.
If the card's interest rate is higher than 25% then the statement should have a "wealth warning", the Commission said
Statements should also outline late payment charges and the consequences of only making minimum monthly repayments.
In September, the Commission said consumers are being overcharged £100m a year due to inflated interest rates.
At the time, the Competition Commission said it had provisionally concluded that the market for offering consumer credit through retail store cards was uncompetitive.
The body said retailers and lenders were protected from competitive pressures and there was little incentive to reduce annual percentage rates (APRs) on store cards, which currently averaged about 30%.
This compares unfavourably to credit cards which commonly charge between 15% and 20% and the Bank of England base rate, which is currently 4.5%.
Since September, the Commission has been consulting retailers and store card providers on how information for consumers can be improved.
The Commission will publish its final report into the store card market in February.
It is expected to order firms to adopt its proposals in full by the end of 2006.
"We are already seeing lenders improving their consumer offering," a Competition Commission spokesman said. "Interest rates have already started to fall.
"When our changes come into force consumers will clearly see how much their store card debt is costing them."
However, lenders said the introduction of a wealth warning could skew the market.
"The 'wealth warning' could be construed as a de facto cap - leading to clusters of APRs sitting around 25%, which would have a detrimental effect on consumer choice," a spokesman for the Finance and Leasing Association said.
The Commission's proposals for statements to include warnings and other information will bring the store card market in line with the wider credit industry.
The credit card industry, following a parliamentary Treasury Select Committee enquiry into UK debt, agreed to introduce similar warnings on statements last year.
There are about 14 million store card accounts in the UK.
If the card's interest rate is higher than 25% then the statement should have a "wealth warning", the Commission said
Statements should also outline late payment charges and the consequences of only making minimum monthly repayments.
In September, the Commission said consumers are being overcharged £100m a year due to inflated interest rates.
At the time, the Competition Commission said it had provisionally concluded that the market for offering consumer credit through retail store cards was uncompetitive.
The body said retailers and lenders were protected from competitive pressures and there was little incentive to reduce annual percentage rates (APRs) on store cards, which currently averaged about 30%.
This compares unfavourably to credit cards which commonly charge between 15% and 20% and the Bank of England base rate, which is currently 4.5%.
Since September, the Commission has been consulting retailers and store card providers on how information for consumers can be improved.
The Commission will publish its final report into the store card market in February.
It is expected to order firms to adopt its proposals in full by the end of 2006.
"We are already seeing lenders improving their consumer offering," a Competition Commission spokesman said. "Interest rates have already started to fall.
"When our changes come into force consumers will clearly see how much their store card debt is costing them."
However, lenders said the introduction of a wealth warning could skew the market.
"The 'wealth warning' could be construed as a de facto cap - leading to clusters of APRs sitting around 25%, which would have a detrimental effect on consumer choice," a spokesman for the Finance and Leasing Association said.
The Commission's proposals for statements to include warnings and other information will bring the store card market in line with the wider credit industry.
The credit card industry, following a parliamentary Treasury Select Committee enquiry into UK debt, agreed to introduce similar warnings on statements last year.
There are about 14 million store card accounts in the UK.
posted by Your Friends @ Myvesta.org.uk at
1/21/2006 10:46:00 pm
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home