Card issuers braced for assault

LINDSEY ROGERSON
PERSONAL FINANCE EDITOR

THE UK’s credit and store card providers are bracing themselves for a fresh onslaught from a powerful group of MPs this week.

The Treasury select committee will tomorrow publish an update of its special report into the transparency of card charges.

Considering the grillings to which the committee has already subjected industry bosses during the course of its inquiry into the practices of the UK’s card industry, the arrival of the special report will doubtless be causing some trepidation in the boardrooms of issuing banks.

That is not least because the committee chairman, Dumbarton MP, John McFall has said he will be inviting the credit card chiefs back before his committee in the next few months.

It was during an earlier round of hearings that the Barclays chief executive, Matt Barrett, was forced to admit that he would not borrow on a credit card and had warned his own children against doing so as it was too expensive.

In the months since Barrett’s appalling gaffe, Barclaycard has also been rebuked by the Advertising Standards Authority for misleading its customers.

In the face of all the ensuing negative publicity in the last month, Barclaycard, the UK’s largest credit-card provider, has launched a card offering consumers the longest period of interest-free spending available to date in the UK - 13 months until August 2005.

Indeed, long before the government had even published its proposals for the first reform of the UK’s credit laws in 30 years, the Treasury committee had already forced the credit card industry into adopting a simple, standardised format for presenting all card charges.

The introduction of a summary box has made it easier for consumers to compare the interest charged on new purchases, balance transfers and cash withdrawals.

It has also made it easier for customers and potential customers to see what other charges a provider has, such as £30 for going off the limit and £25 for a late payment.

However, despite this step forward, consumer groups remain critical of card providers’ refusal to adopt a standardised method for calculating APR. This means that two cards charging the same APR on the same level of balance could end up charging quite different amounts of interest because of the different way they calculate that interest.

The committee has also taken card providers, who have collectively increased their consumer advertising spending by 38 per cent in the last three years, to task for the widespread practice of mailing credit card cheques to card customers who have not requested them.

The cheques, if used, typically carry a much higher interest rate than a customer’s normal card APR rate.

McFall has warned card bosses that he will keep investigating the industry until he is satisfied it is being transparent in its dealings with consumers.