OFT turns the spotlight on the real cost of credit cards
Sunday, 1 July 2007
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The Office of Fair Trading (OFT) has launched a consultation on how to make it easier for consumers to compare the cost of credit cards.
Every element - the different interest rates on purchases, cash advances and introductory offers, as well as priority of payments - will be looked at, the OFT said.
The work is expected to take six months and will involve talks with the credit industry, consumer groups, government bodies and regulators.
"Credit card pricing has become increasingly complex, with many new dimensions such as interest-free periods," said the OFT's chief executive, John Fingleton.
"While these new pricing dimensions give additional choice and value, they can make it harder for consumers to make informed decisions."
He added that the OFT will look at how pricing information might be improved to help customers to compare different deals.
The OFT's move follows a supercomplaint lodged by the consumer body Which? in April. This highlighted concerns that customers are choosing credit cards without understanding all the issues that affect the cost.
Which? also drew attention to the lack of transparency in the way interest is calculated, and said customers were prevented from making an informed choice on the basis of price.
The announcement left Which?'s chief executive, Peter Vicary-Smith, unimpressed: "We can only be sceptical about the OFT's proposed negotiation plans with the industry. With no legal threat and no ambitious goals, what can it expect to achieve?"
