UK shoppers who choose to pay for goods with store cards are paying out up to 20 per cent too much on credit, the Competition Commission (CC) has announced.
The figure is among the findings of the commission’s final report into store card credit. Overall, UK borrowers are paying out £55 million a year in excessive store card charges.
The CC has now demanded that stores should compare credit card charges and inform people that credit is available far cheaper elsewhere on applications for cards charging above 25 per cent.
They should also allow people to pay off balances via direct debit and sell payment protection insurance separately.
“Store cardholders who take up credit and associated insurance pay too much,” said CC deputy chairman Christopher Clarke.
“Specifically, we estimate that for the period 1999 to 2003, APRs have been some ten to 20 per cent above what they would have been had they reflected providers’ costs across the sector as a whole.”
Consumer groups have accused the commission of failing to go far enough, however. Alena Kozakova of Which? said the CC’s preoccupation with APRs “misses the point”.
“Store cards are an unnecessary and extremely expensive way to borrow and we have always advised people not to use them,” she said.
“Many of the shop sales staff who sell store cards have little understanding of the financial details and yet can be incentivised for each sale.
“This leaves consumers in danger of being badly advised and ending up with a very expensive high interest product that they don’t need,” she added.
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