Store card providers are overcharging consumers by up to £100 million a year, the competition watchdog said yesterday.
The Competition Commission said the interest rates charged on the cards were between ten per cent and 20 per cent higher than if they simply reflected the providers' costs.
It said there was a lack of competitive pressure in the £4.8 billion sector on either the annual percentage rates (APRs) charged or the cost of associated insurance, with most APRs clustered around 30 per cent.
The CC said the longrunning investigation into the market had already prompted some major card providers to lower their APRs, but it was still proposing a series of remedies to protect the consumer.
These include putting warning notices on card statements to draw consumers' attention to the high interest rates they are paying, as well as information on the cost of any related insurance they have.
It is also considering measures to make consumers more aware that they can pay balances by direct debit as a way to reduce the number of cardholders who get into difficulty through inertia or lack of awareness of APRs and payment terms.
The CC may also call for the various insurance products, such as payment protection insurance, to be offered separately to give consumers more choice in selecting cover that meets their needs and enable them to compare prices.
At the end of last year there were almost 14 million active store card accounts, with outstanding balances of about £2.5 billion.
Around 70 retailers offer store card services, with the majority operated by six card issuers, including General Electric Consumer Finance and HSBC.
The CC, which looked at the industry between 1999 and 2005, said retailers main concern was to avoid having an APR which was above those offered by other store cards.
It added that consumer awareness of APRs and other charges was also low, with most people taking out a store card because of the retail benefits offered rather than as a source of credit.
But despite this 57 per cent of people with one of the cards failed to clear their balance in full each month.
Overall the provisional findings of the inquiry, which followed a reference from the Office of Fair Trading, estimated that consumers were overpaying by £80 million to £100 million a year through APRs and insurance prices.
At the same time the CC said most store card providers were failing to provide adequate information in monthly statements on the APRs charged, late payment fees and insurance costs.
Liberal Democrat trade and industry spokesman Norman Lamb said: "This report confirms that many store cards are a rip-off."
The Finance and Leasing Association, whose members include all the major store card providers, said that since regulators started looking at store cards two years' ago, the market had moved on.
Ashley Holmes, head of legal affairs at the FLA, said: "We are now seeing lower store card APRs and greater consumer transparency."