LONDON: The Competition Commission has found that in the absence of competition, store card users end up paying 10 per cent to 20 per cent more on interest and insurance, which on an annualised basis could be of the order of 55 million pounds. The commission, which carried out a two-year-long investigation, has directed store card providers to provide information to customers that they may get better deals elsewhere.

The commission’s deputy chairman Christopher Clarke said retailers and store card credit providers are insulated from competitive pressures and “We estimate that the detriment in terms of the excess prices paid for credit and insurance on store cards has been at least 55 million pounds a year, and possibly significantly more.”

There are 11 million Britons who use store cards mostly provided by six prominent players — Arg Card Services, Creation Financial Services, General Electric Consumer Finance UK, HSBC Group, Ikano Financial Services and Style Financial Services. These cards usually offer discounts on purchases within a fixed period — as well as a period of interest-free credit lasting a few weeks. Though the adverse publicity has led to a fall in the interest rates, these are still prevail around 30 per cent, compared with 10 to 15 per cent for conventional credit cards.

The commission is telling card providers, who charge an annual percentage rate (APR) above 25 per cent to print warnings on monthly statements that cheaper credit may be available elsewhere. It has also called for providing payment protection insurance to cover debt repayment for borrowers who lose their sources of income separately instead of including it in store card insurance and offer the option to pay by direct debit.

The commission had originally mooted these proposals in September to be implemented on a voluntary basis. It will now be imposed by an order.

The commission found that there were 11.4 million store cards in circulation at the end of 2005, down from 17.5 million at the end of 2002. Some 57 per cent of cardholders took credit on to their accounts, paying it back with high rates of interest.

The Finance & Leasing Association, which represents major store card providers, claimed the higher APRs are now historic and that most consumers were now offered a range of rates beginning 12.9 per cent.

Ashley Holmes, the association’s head of legal affairs, said the APRs are now lower and there is greater consumer transparency. He said the warning on cards costing more than 25 per cent could act as a back door cap on prices and may backfire.

A spokesperson for consumer rights organisation Which? said consumers should avoid store cards altogether.