MPs slate banks over credit card charges

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The Independent Online

Capital One, the US lender, came under fire yesterday from a cross-party group of MPs for listing 144 possible rates of interest for a single card in small print. One MP, Labour's James Plaskitt, said: "There is no way that can be defined as transparency, it's pure obfuscation."

Capital One, the US lender, came under fire yesterday from a cross-party group of MPs for listing 144 possible rates of interest for a single card in small print. One MP, Labour's James Plaskitt, said: "There is no way that can be defined as transparency, it's pure obfuscation."

His outburst came as the Treasury committee grilled executives from three of the biggest card issuers in Britain, James Crosby of HBOS, Eric Daniels of Lloyds TSB and Fergus Brownlee of Capital One.

Banks currently use nine different methods of calculating interest on cards, according to the consumer group Which?. Citing research by Egg, the committee chairman John McFall, Labour MP for Dumbarton, said an Egg card with an APR of 22.7 per cent could still be cheaper than a Lloyds Advance Card with a rate of 11.9 per cent.

"There is something fundamentally wrong if the interest rate doesn't reflect the actual price of the product," said Laurence Baxter, a senior policy adviser at Which?, who attended the hearing. "How can you borrow responsibly if the banks don't lend responsibly?"

A universally agreed definition of APR will come into effect at the end of this month, the Association for Payment Clearing Services said. But this will not solve the problem and charges on credit cards will still vary widely, Mr Baxter said. Mr Daniels and Mr Crosby refused to agree to a standardised method of calculating interest because that would limit innovation and competitiveness.

The bank executives were also criticised for not fully sharing credit data that could stop consumers racking up huge debts, and for overly penalising customers for late payments.

Mr McFall said: "You are skimming money off certain customers, largely speaking poorer customers."

MPs also attacked the industry's issuing of unsolicited credit-card cheques, which could lead to even greater debt.

The Liberal Democrat member Norman Lamb told of one of his constituents, a 21-year-old deaf man, who took his life in August after racking up £15,000 of debt. The family continued to receive threatening letters from debt collectors even after informing Halifax, one of the lenders involved, of his death.

Committee members criticised the published "summary boxes" setting out terms and conditions because they are done in different ways and appear in different places, defeating the purpose of a standardised information box.

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