Egg survey sparks row with rival providers

A furious row erupted yesterday between some of Britain's major credit companies over a report published by Egg that claims methods employed by its rivals are often so misleading consumers have little chance of understanding the true cost of the products.

Egg, one of the fastest growing card providers in the UK, singled out Lloyds TSB for particular criticism, but also accused HBOS, Royal Bank of Scotland, MBNA and Abbey of using complex methods.

In some cases, Egg said, lenders "create an illusion that they are being offered a better deal than is really the case".

According to Egg's findings, published today, seemingly small differences in how providers calculate interest on cards can make their headline offers misleading and can also mean huge variations in what customers actually pay.

Robert Hunt, of the Isaac Newton Institute at Cambridge University, was commissioned by Egg to investigate the industry. He used the Lloyds TSB Advance Card as an example. He said that while Lloyds promoted the card with an annual percentage rate (APR) of 11.9 per cent, if interest was calculated using Egg's method it would have an effective rate as high as 22.7 per cent.

However, David Gagie, head of consumer lending at Lloyds, reacted furiously. He said: "Egg has been mendacious. They know they have not compared like with like." He also rounded on Egg's own approach to calculating the APR, which involves combining the interest-free period with the rate consumers move on to later.

"We do not think that gives consumers an idea about the true cost of credit. It is misleading that Egg, and Nationwide building society, which purport to be consumer champions, adopt that approach," Mr Gagie said.

However, Egg's survey will add fuel to the argument that the Government should increase regulation of the industry. It comes as the Department of Trade and Industry is due to submit its blueprint for reform of the credit card industry to MPs on the Treasury Select Committee tomorrow. Under the new Consumer Credit Act, the DTI is coming under mounting pressure from consumer groups to force providers to use a standardised method to calculate interest.

Some of the confusing methods highlighted by Egg include starting to charge interest at different times. Some providers calculate it from the day a purchase appears on a customer's bill. But others charge it from the day the item is bought - even though the retailer does not usually bill the credit card company for the sum until two days after the transaction.