Credit card companies 'let down' customers

Credit and store card companies were today slated by MPs for a lack of transparency, irresponsible lending and charging excessive interest rates.

The Treasury Select Committee said consumers had been "badly let down" by card companies whose lack of transparency left them confused about charges.

It added that the companies marketing practices were "highly misleading and highly damaging" to the interests of consumers, and could lead to people sleep-walking into debt.

In a highly critical report it said problems included having two different ways of calculating APRs, which measures how much interest is charged.

There are also 10 different ways of calculating charges on cards, making it difficult for consumers to know if they have a good deal.

The committee said the regulatory regime governing credit and store cards was from a "bygone age" and had failed to keep pace with changes in the market.

John McFall, chairman of the Treasury Select Committee, said: "During the Christmas period £13billion is expected to be spent on credit cards.

"Consumers are good for the industry, but the favour is not returned."

The report called for a number of reforms.

Those include the introduction of a single method for calculating APRs, as planned by the Government in its Consumer Credit White Paper, and standardising the way interest charges are calculated.

The report also wants a summary box containing key information to be included on people's monthly credit card statements.

This will appear along with information on how long it would take to repay the debt if they made only the minimum payment each month.

The committee said it will be monitoring the actions of the industry, Government and the regulators during the next six months to ensure the market becomes more transparent and more competitive.