OFT to investigate store card interest charges

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High street retailers are to be investigated over the massive interest they charge on store cards, the Office of Fair Trading said yesterday.

The watchdog said it would carry out a study into the way the market worked in order to assess whether there was proper competition and transparency in the market.

The move, at this stage an "informal study", could lead to a formal investigation under the Competition Act. If retailers and banks which provide the cards are found to have acted in an anti-competitive way, they could be in line for massive fines.

John Vickers, the OFT's chairman, announced the study when giving evidence to the Commons Treasury Select Committee, which has been investigating the credit card market.

It is likely that companies including Debenhams, Bhs, Comet, Laura Ashley and Top Shop will come under the spotlight in the investigation.

About 10 million customers have store cards, with some paying up to 30 per cent in interest on their debt.

The chief executives of Britain's biggest banks are scheduled to appear before the committee of MPs next week to defend the wider credit card market, which has also been accused of being deliberately untransparent and poor value for money.

Customers owe up to £2.5bn on store cards at any one time. GE Capital, the banking arm of the US-based empire, operates many UK store cards. The OFT said an inquiry could potentially lead to banks being fined millions.