Competition Commission issues “wealth warning”
- 22ND MAY 2007
"Extortionate" interest rates on store cards will now come with a “wealth warning” issued by the Competition Commission.
Credit providers who charge Annual Percentage Rates (APRs) greater than 25 per cent will now have to advise their customers that cheaper credit may be available elsewhere. The warning will be given on the front of their monthly credit card statements.
This new regulation is part of a series to be issued by the Competition Commission which is currently also investigation the payment protection insurance (PPI) sector. While the review of the latter is expected to come to a conclusion in February 2009, the Commission has said that store card providers that offer insurance packages are obliged to now list payment protection insurance cover separately from the other elements of insurance cover provided under the card.
Payment protection insurance is a very controversial product which affords protection should the card holder become unable to work due to long term illness, accident or redundancy. The cover will meet their monthly credit repayments for a period of typically up to 12 months (though some cover will run for 24 months).
However, this type of cover is not compulsory and if often unsuitable or some individual such as the self employed; part time workers or retired people. When sold by store card providers, it can often work out extremely expensive compared to the cover offered by independent providers such as the ethical British Insurance.
Commenting on the new guidelines, Simon Burgess from British Insurance said that he welcomed the changes but felt that there were still “a hell of a lot more improvements that need to be made in order to protect the customers.”
