'Scandal' of storecard interest rates

Click to follow
The Independent Online
SOME high street chains make more money from excessive storecard interest rates than from sales, Labour claimed yesterday, writes Patricia Wynn Davies.

Robin Cook, the party's trade and industry spokesman, said that only one concern, Marks and Spencer, had passed on the full benefit of reduced interest rates to cardholders.

A survey by the Labour Party into cards offered by big retail chains puts the Dixons interest rate at almost 35 per cent, compared with less than 20 per cent at the London-based John Lewis partnership, while the average rate on storecards is now 27 per cent, more than four times the 6 per cent base rate.

Calling for a review by the Director of Fair Trading, Mr Cook said that most stores had held back up to half of the base rate cuts that had been introduced in the last three years. He called it the 'great storecard scandal'.

Base rates have dropped from 10 per cent over the past year and 15 per cent in 1990. Mr Cook said that when interest rates were at their peak the average rate on storecards was 18 percentage points above base rate.

'Over three years in which interest rates have come down, the average premium on storecards has climbed another three points to 21 per cent. Some stores must be making a bigger profit out of their excessive interest rates than out of selling their goods.'

Elizabeth Stanton, of the Retail Credit Group, which represents a number of major stores such as Dixons, Marks and Spencer and the Sears and Burton groups, said: 'The average amount currently owed on a store card is pounds 163, so we can hardly be ripping off customers for such small amounts.'

She added: 'Most customers pay off their store cards each month and do not pay any interest.'