Store cards

18 March 2004

Following the OFT's informal, fact-finding review of store cards, it has made a reference to the Competition Commission of the following services:

(a) store card credit services to retailers and related services
(b) consumer credit through store cards.

The OFT has referred these services to the Commission because of:

• transparency concerns on the pre- and post-contract side which will not necessarily be covered by the Consumer Credit White Paper
• concerns as to whether the market for the supply of store card credit services to retailers is working well given that entry and expansion is difficult because of incumbency advantages (length of agreements and exclusivity clauses), switching costs and sunk investment costs
• in relation to the supply of consumer credit through store cards, the inability of consumers to assess the costs and benefits of store card use, including whether the level of APRs would be lower if that assessment were easier.

Download Store cards (pdf file 618 kb).

See terms of reference, which is made under section 131 of the Enterprise Act 2002.

See press release.

Further action

The OFT will run a consumer education campaign later in the year to raise awareness of store card issues such as interest rates, minimum payments and signing up to agreements.

Background

The OFT announced its fact-finding review of store cards on 17 September 2003.

The review examined:

• the process by which consumers obtain store cards
• the conduct of credit providers and retailers that offer store cards
• the interest rates and other charges that are charged to a store card holder
• the market participants and market structure of the store cards sector.

The OFT also commissioned a consumer survey and mystery shopping exercise in the store cards sector and met or received written submissions from the leading credit providers, retailers and consumer groups.

Announcement of study - see press release.

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