Britain's competition watchdog yesterday served final notice to store card providers to cut the £100 million in "excess" profits they make each year from high interest rates and charges.
The card providers now have until January 9 to respond to a "Statement on Remedies" published by the Competition Commission, in which it proposes measures such as obliging credit providers to disclose full information on interest rates, charges and insurance fees prominently on statements.
This will include a "wealth warning" on the consequences of only making the minimum payment, an annual percentage rate (APR) warning where the APR exceeds 25 per cent, and the obligation to offer direct debit payment to avoid late payment charges.
Most of the proposals were originally floated in September, but the card providers now have just a few working days to comment on the new, more detailed framework, which the Competition Commission said would be imposed by order rather than by voluntary undertaking.
"It'll just be practically quicker than discussing undertakings with lots of different parties, which might be quite an onerous process," a spokesman said.
UK consumers have a cumulative balance of £2.5 billion on almost 14 million issued store cards, which differ from credit cards in that they can only be used for purchases in a single store chain, or at best in a limited group of stores.
Unlike conventional credit cards, store cards usually offer discounts on purchases within a fixed period - as well as a period of interest-free credit typically lasting a few weeks.
There are about 70 different store cards in the UK, typically issued by department stores or clothing chains and offering widely differing terms, but there are only six main issuers behind them. GE Consumer Finance, part of US conglomerate General Electric, has about half the market, although some measures put that share even higher.
Other players include HSBC Holdings, which is expanding in consumer credit and runs the John Lewis and Marks & Spencer store cards, Arg Card Services, Creation Financial Services, Ikano Financial Services and Style Financial Services.
Stung by the ongoing probe, store card interest rates have already fallen. While many APRs were clustered around 30 per cent at the beginning of the investigation in 2003, some are now considerably lower.
But rates are still typically set well above credit card rates, typically 12 to 18 per cent, and the Competition Commission believes UK consumers were paying between £80 million and £100 million too much in interest, insurance charges and late payment fees each year.
Edward Simpson, for the Finance & Leasing Association which represents store card providers, said it would continue to work with the Competition Commission, but it had some objections. ..SUPL: