Friday, May 24, 2024

Britons pay £100 million in ”overcharges” on store cards

LONDON – The UK’s Competition Commission has said it has found evidence that retail store cards were being overcharged and consequently consumers were ending up paying an extra £100 million a year. The Commission further said that store cards are uncompetitive.

These store cards charged higher interest rates and were thus drilling a hole into the holders’ pockets. Around 14 million store card accounts exist in the UK. The competition watchdog added that it wanted warnings on the cards to inform consumers of these liabilities.

In a report that was released this morning, the commission said that since there was no pressure on the stores to ensure that they charge competitive Annual Percentage Rate (APR) interest on credit, they were virtually charging at their will.

“Store card APRs (interest rates) are on average some 10 to 20 percent higher across the store card market as a whole than they would have been had they reflected providers’ costs, including the cost of capital,” said commission deputy chairman Christopher Clarke. “The detriment to cardholders in terms of the excess prices paid for credit and insurance is in the region of 80 million to 100 million pounds a year,” he added. The Commission’s investigation has tuned up some problems in this regard for which it is consulting to find possible solutions. Following a parliamentary Treasury Select Committee enquiry into UK debt, the credit card industry had agreed to put out similar warnings as demanded by the commission on the general use credit cards.

“People, it seems, are genuinely ignorant about the rates they are signing up to when they take out a store card…if we raise the level of consumer knowledge then competition will improve and APRs, which are too high, should fall,” said a Competition Commission spokesman.

HSBC Holdings PLC and GE Consumer Finance are two of the leading companies that provide store cards in Britain.

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