David Prosser: Store card watchdog lacks bark or bite
Saturday 11 March 2006
Take Christopher Clarke, the commission's deputy chairman, who last year earned an annual salary just shy of £53,000 for a four-day week. This week, Mr Clarke completed his investigation into whether the store card industry is anti-competitive and guilty of overcharging some 11 million borrowers.
It can't have been the toughest assignment. It's just taken me about five minutes to look up the interest rates charged by the 70 or so retailers that offer their customers store cards. Most are in the region of 25 to 30 per cent a year, about four times as expensive as the cheapest conventional credit cards. And since a handful of lenders - around five - stand behind all these store-card schemes, it's pretty clear that something approaching a cartel has been operating.
The good news is that Mr Clarke has come to the same conclusion. On the downside, it's taken him two years to get there. The commission was first asked to investigate what everyone else already knew - that store cards are an outrageous rip-off - in March 2004. This week, the watchdog has at last published its final verdict. Guess what? It's decided store cards are an outrageous rip-off.
Some readers may now be a little anxious that Mr Clarke could be feeling under pressure to do something about this con. If so, let me reassure you. The commission has indeed come up with some new rules designed to bring store card lenders to book, but it won't be introducing them for another 12 months.
Fair enough; the store-card industry has only had two years - and a preliminary report published last year - to get used to the idea of a tougher regime.
Nor should Mr Clarke be overly taxed in enforcing the new regulations, some of the most toothless measures I've ever seen. For example, lenders charging more than 25 per cent annual interest will now have to tell borrowers each month that cheaper credit is available to them elsewhere. Charge a still-exorbitant 24.99 per cent, on the other hand, and no such rule will apply.
All lenders, admittedly, will be bound to publish clearer information on the statements they send to customers. But that's no use if you've already spent a fortune on your store card. And it won't protect you from pushy sales assistants who, despite having no financial qualifications whatsoever, are often incentivised by retailers to advise customers to take out this overpriced plastic.
All in all, working at the Competition Commission looks a good move to me. Plenty of money for not a great deal of action. Now where do I send my CV?
* I see David Cameron has recruited Kirstie Allsopp, everyone's favourite property guru, to campaign against the Government's plans to introduce home information packs next year. While she's at it, she might want to turn her attention to stamp duty.
Research published by the Portman Building Society today shows that in the nine months since the Government doubled the level at which stamp duty becomes payable - on home purchases worth £120,000 and above - the Treasury has still earned more from the tax than it did in the previous nine months.
The average home-buyer now pays £3,184 in stamp duty, and most first-time buyers - about whom Allsopp is most concerned - are having to pay the tax.
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