Store card borrowers will continue to pay rip-off interest rates and high charges despite a two-year Competition Commission inquiry into the industry, consumer groups warned last night.
The National Consumers Council (NCC) and Which? slammed the new rules on store cards announced by the commission as "missing the point" and "disappointing".
The commission was appointed in March 2004 to investigate whether a lack of competition in the store card market was detrimental to consumers' interests. Although more than 70 retailers offer store card schemes to customers, the majority are provided by a small group of credit card issuers, including Creation Financial Services, GE Consumer Finance and HSBC.
Yesterday, the commission confirmed a preliminary ruling against the store card industry, released last year. It pointed out that retailers such as B&Q, Burton, Harrods, Oasis and Toys R Us continue to charge between 25 and 30 per cent annual interest on their store cards, about 20 percentage points more than the cheapest standard credit cards.
Store card providers will have 12 months to comply with new rules designed to give consumers better information about the cost of borrowing. Monthly statements sent to cardholders paying 25 per cent a year or more will have to include a warning that cheaper credit may be available elsewhere. All statements will have to include clearer information on charges and customers will have to be given the option of paying by direct debit. In addition, store card providers selling expensive payment protection insurance will be required to offer the policies separately to any other cover they sell.
Christopher Clarke, the commission's deputy chairman, said the new rules would help reduce the £55m a year the watchdog estimates is paid in excess charges by Britain's 11 million store card borrowers, who collectively owe more than £2bn.
Claire Whyley, at the NCC, said the measures would not force lenders to cut their rates. "This is a market that's been failing consumers for a long time. Expecting consumer behaviour alone to make it work is letting the industry off the hook," she said.
Alena Kozakova, at Which?, added: "The sales process needs most attention so consumers know what they're getting into."