Watchdog sets out concerns over store card charges

The Office of Fair Trading yesterday confirmed that it is to review the position of so-called store cards - credit cards issued by retailers - and outlined its "areas of concern".

Last week the OFT's chairman, John Vickers, announced the study when he was giving evidence to the House of Commons Treasury Select Committee's own inquiry into the credit card market.

The OFT added yesterday that it would look in particular at the application of competition law to store cards, their marketing and sales practices, transparency issues and interest rates.

The statement said: "The study is an informal fact-finding review and is not being carried out under the OFT's enforcement powers. The OFT will be speaking to industry participants and consumer bodies as part of the review, which is expected to be published early in the new year. The OFT will then state what further action, if any, it proposes to take."

Further action could involve a formal investigation under the Competition Act and massive fines for card issuers.

While most major department stores and clothing chains issue their own cards, including Harrods, Selfridges, House of Fraser, Debenhams, Bhs, Comet, Laura Ashley and Top Shop, the US-owned GE Capital administers 80 per cent of the 10 million UK store cards.

These cards have attracted widespread criticism because they charge interest rates of up to 30 per cent, compared to the 12-18 per cent charged by mainstream credit cards and personal loans of less than 7 per cent. Store card rates have not fallen in the past four years, when Bank of England base rate has halved to 3.5 per cent.

A GE statement said that it "welcomes the opportunity to engage with the OFT to clarify a number of issues regarding its consumer credit business and is committed to looking at further ways to improve transparency of credit products to consumers.

"GE Consumer Finance (UK) is working hard to take a lead within the consumer credit industry to introduce new developments, particularly at the point of sale and in information packs given to all cardholders. We will continue to be proactive in this area, and are closely in touch with industry bodies to ensure a consistency of approach with the large number of other operators in the consumer credit market."