Britain's retailers could be forced to display a "wealth warning" on their store cards, alerting consumers to the extortionate rates of interest they charge, according to proposals from the Competition Commission.
Publishing its provisional findings and recommendations yesterday after an 18-month inquiry into the sector, the Commission criticised retailers for not providing adequate information to consumers, saying a lack of competitive pressure in the market had left consumers at risk.
It highlighted the extortionate interest rates in the market - often as much as 20 percentage points higher than the cheapest credit card deals - and the excessive prices charged for payment protection insurance.
The Commission suggested disclosures that retailers should be forced to print on customer statements, including a special "prominent" warning if the interest rate exceeded a pre-determined threshold.
Other suggestions included retailers being forced to provide accurate annual percentage rates (APRs) on outstanding balances, clearer disclosure of charges and better opportunities for customers to pay off their balances in full. The Commission said it was minded against imposing a cap on interest rates, but said it had not ruled it out.
Christopher Clarke, the deputy chairman of the Commission, said: "Retailers' primary concern is to avoid having an APR on their store card which is above those of other store cards. At the same time, consumers' sensitivity to APR levels and other charges is low. Taken together, this results in store card holders who take up credit, and associated insurance, paying more than they would in a fully competitive market.
"We must therefore look to put in place measures that will bring about greater competition."
Which?, the consumer organisation lobbying for tighter regulations in the store card market, said the findingsdid not go far enough. Phil Evans, of Which?, said: "What we need at the bare minimum is an industry-wide code to stop what amounts to store card mis-selling, and we are surprised the Commission stops well short of calling for this. Store cards are an unnecessary and extremely expensive way to borrow."
Ashley Holmes, the head of legal affairs at the Finance & Leasing Association, the store card industry's trade body, said: "Since regulators started looking at store cards two years ago, the market has moved on - APRs are no longer clustered at 30 per cent. We are now seeing lower store-card APRs, the move to store-branded credit cards and greater consumer transparency. We continue to consider initiatives which could address the Commission's concerns."Reuse content