Store card probe highlights interest rate risks

The government's competition watchdog has today highlighted question marks over the interest rates charged by store cards.

16:34 11 January 2005

The government's competition watchdog has today highlighted question marks over the interest rates charged by store cards.

While publishing a consultation document on the store card industry, the Competition Commission identified areas of potential concern, including the interest rates and other charges that apply on store cards.

It is also concerned over the payment protection insurance sold with the cards.

"After examining a huge amount of evidence in this inquiry to date, we think there are some areas of concern that we need to explore further," said chairman of the commission Professor Paul Geroski.

The commission has raised questions over whether companies are making "excessive" profits from the cards and over the fact that the interest rates charged and insurance costs on the cards are remarkably similar across the market.

Additionally, the commission points out that interest rates on store cards have not fallen in line with the base rate, nor do they reflect falls in interest charged by credit card providers.

A recent Which? investigation into ten high-street stores found that many of those selling store cards to shoppers did not know the interest rate charged or the late payment fees levied.

"They're an expensive way to borrow and if the staff pushing them don't know how much they cost, we wonder how many people who've been persuaded into taking them realise they're being charged through the nose," editor Malcolm Coles said in December.

If the nature of the market has led to higher prices, lower quality or less choice of goods or services in the UK, the Competition Commission has powers to alter the structure of the market or the way card providers and retailers are selling them.

It expects to publish its final report into the store card market before March 17th next year.