Store card inquiry to study wider credit market

The Competition Commission has decided to widen its inquiry into store cards, which charge interest rates of up to 30 per cent, to include other forms of credit such as credit cards after being lobbied by store card issuers.

The Competition Commission has decided to widen its inquiry into store cards, which charge interest rates of up to 30 per cent, to include other forms of credit such as credit cards after being lobbied by store card issuers.

Professor Paul Geroski, the chairman of the commission and the inquiry group, said: "The inquiry has to encompass ongoing developments in the store card sector. Even during the short life of this inquiry, we've seen changes, with APRs being cut in some cases, retailers renegotiating their contracts with credit providers and an increase in co-branded credit cards. We may need to look at other forms of consumer credit in order to understand, in particular, which market or markets the services that have been referred to us fall into.''

In March, the Office of Fair Trading referred the inquiry into the £4.8bn store card market to the Competition Commission after concluding that there was a lack of transparency in all stages of providing store cards, from signing up customers to the information given after the card has been issued. Nearly one-third of Britons hold a store card, many lured by the offer of an instant 10 per cent price reduction. More than a third of these fail to clear their balance every month.

GE Consumer Finance, one of the major providers of store cards, responded to yesterday's announcement by pointing out that "GECF has always said that a widening of the focus into consumer credit is critical for consumer transparency on the high street. Store cards represent less than 3 per cent of the total £207bn consumer credit market, so widening the inquiry will be paramount for greater consumer transparency.'' GECF said customers need to compare the cost of credit across all products including all fees and charges, not just APRs.

A spokesman for the Competition Commission said the inquiry always intended to look at credit cards as well as store cards, but admitted that GECF's presentation at an open hearing in July highlighted the importance of a wider inquiry into the consumer credit market. He said the first stage of evidence gathering has been completed and that the commission hopes to publish some provisional findings towards the end of spring. The aim is to complete the investigation in 18 months, rather than the statutory two years, he said.