Credit card providers criticised by MPs

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Credit card providers criticised by MPs

Fri 4th Feb 2005

Credit card charges and rates should be better explained to consumers, an influential group of MPs has said.

Following a two-year inquiry into the credit card industry, the Treasury Select Committee today published its findings.

Along with calling for greater transparency from lenders on penalty charges and interest rates, the committee said that sending out unsolicited credit card cheques should be stopped, payment protection insurance should be investigated by the Financial Services Authority, and lenders should share more information to prevent people building up huge debts over several cards.

But there was some praise for the work the credit card industry has done since the committee's last report in 2003.

Treasury Select Committee chairman John McFall noted: "Consumers still deserve a better deal from credit card companies.

"While the industry has taken on board recommendations from our previous report, they have some way to go to make their deals easier to understand and compare."

Since the last report was issued credit card providers have standardised the way interest rates are calculated and introduced a summary box to provide the headline charges on their cards.

But there is still variation in the industry, as interest is charged over different periods of time. This means in some instances cards with a higher headline rate of interest can work out cheaper.

Mr McFall noted: "Even with the APR, consumers find it virtually impossible to work out which card would be the cheapest; this is highly unsatisfactory.

"As one issuer has acknowledged, an illusion can be created that a deal is better than it really is. The industry needs to tackle this problem as a matter of urgency, if necessary through some degree of standardisation of interest calculation methods."

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