The government watchdog the Competition Commission has found that store card providers overcharge their customers by applying interest rates on average 10 to 20 per cent higher than necessary.

The CC announced in January that it was considering acting against store card providers who overcharged customers, and has announced a package of measures designed to encourage the store card lenders to toe the line.

In a series of moves designed to force better competition, the CC has announced that store card companies must:

• print a clear financial health warning where the interest rate is above 25%

• improve the information they show on monthly statements

• be fair with the way in which they bundle expensive insurance options

Expensive Credit

You would need to track down a loan shark to find a worse deal than many store cards. Enticing customers with special offers, discounts and more, store cards are peddled at the point of sale without customers receiving important advice about their cost and alternative options for credit.

Interest rates of 25 to 30% are common, compared to average credit card rates of 15 to 20% and personal loans at around 10%. The CC found that the cost to UK consumers of store card overcharging was at least £55 million.

Announcing the decision, Deputy Chairman of the CC, Christopher Clarke said:

"Retailers and store card credit providers are, we have found, effectively insulated from competitive pressures. The consequence is that store cardholders who take up credit and associated insurance pay too much."

The Office of Fair Trading is expected to enforce the new measures with all card companies within the next twelve months.