UK Credit Card Companies Bow To Government Pressure

Credit card companies are succumbing to the pressure exerted by the government committee on transparency and are on the brink of finalising the details of an 'honesty box' showing full rates and charges on their advertising.

APACS represents over 95 pct of credit cards in issue in the UK. The honesty box - or summary box as APACS prefers to call it - should give customers "very clear information" about the up-front charges, any fees they might encounter, and other pertinent details such as the interest-free period on a balance.

The credit card companies have been under considerable pressure since a Treasury Select Committee on Transparency of Credit Card Charges convened on July 1 this year.

The chairman of that committee John McFall, criticised the companies for leaving consumers with "little chance of fully understanding the way in which charges on their cards are calculated."

The industry's been trying to get there for a while. But what's brought things to a head is the Treasury Select committee. Treasury select committee spokeswoman Liz Partridge said whether the committee is placated by the companies' move is a matter of conjecture.

It depends very much on what they come up with. It could well be very basic and fail to address all the serious concerns of the committee. Partridge noted that the committee would be perfectly able to comment on and recommend changes to any measures preemptively introduced, although she added that companies are yet to provide details of any measures they will take.

The committee will meet again on Oct 16 in what promises to be a lively meeting with the CEOs of Barclaysk, Lloyds TSB PLC, Royal Bank of Scotland PLC, HBOS PLC and MBNA European Bank. APACS is planning to release full details of the initiative in time for the hearing.

APACS is "biting the bullet" on transparency, despite the environment for an honesty box being far from perfect. The reason for that, she says, lies at the feet of the Office of Fair Trading (OFT) which brought in a second method of calculating the annual percentage rate (APR) two years ago.

The government now needs to clear up the confusion, she said. Credit card companies want to go back to a single APR calculation method, "but we need a legal basis for that."

At present, the two methods of calculation can produce different results using the same data, meaning comparisons between rates in the planned honesty boxes could still confuse consumers.

Quinn said direct mail advertising will be the prime focus for the initiative. But there will be no equivalent on television adverts and APACS is still assessing whether it will be allowed on billboard posters where strict rules on plugging the APR apply.

Barclaycard's Barber concedes that criticism over transparency in the industry - culminating in the select committee hearings - "is to a certain extent justified." But he argued that improving on that record will be to the benefit of everyone.