Probe into store cards rip-off
HIGH STREET giants are to be investigated over the massive interest they charge on store cards.
Around 10 million customers who hold the cards are paying annual rates of up to 30%.
Today the Office of Fair Trading said it would hold an inquiry that could potentially lead to the bank which provides the cards being fined millions.
Firms including Debenhams, Bhs, Comet, Laura Ashley, Mothercare, Harrods, Monsoon, Russell & Bromley, Country Casuals, Toys R Us and the Arcadia stores Top Shop and Dorothy Perkins will come under the spotlight.
Their cards are provided by the American bank GE Capital, which has not cut the interest rate to customers since April 1999. In the same period, the Bank of England base rate has halved from 7% to 3.5%.
John Vickers, the head of the OFT, told the Treasury Select Committee that an informal investigation would be carried out immediately.
Committee chairman John McFall said: 'We want to know if the profits made on store cards indicate a competitive market. The OFT was slow off the mark on a number of issues. We have asked them to look at the competition between store card suppliers as we are not sure that consumers are getting the best deal.'
Customers owe up to £2.5bn on store cards at any one time, with GE Capital operating between 50% and 70% of the market. A customer who had a balance of £500 would take ten years to clear the debt paying the minimum payments.
A spokeswoman for the OFT said a formal investigation and fines of up to 10% of annual turnover could follow if uncompetitive practices were revealed.
