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Re: Oft Hits Out At Credit Card Charges
OFT criticises 'complex' credit card deals
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70% of credit card holders have not shopped around for the best deal. Photograph: PA/Chris Young
Credit card providers should make it easier for consumers to shop around and compare deals, the Office of Fair Trading (OFT) said today.
Giving consumers better information about the different charges on cards and standardising the terminology used by providers would allow them to choose the best card for their needs, it said.
And it proposed a credit card comparison website run by the City watchdog, the Financial Services Authority (FSA), to help consumers find the cheapest deals.
Research done by the OFT following a super-complaint by the consumer group Which? found that 70% of credit card holders had not shopped around for the best deal.
It said cardholders were "throwing money away" by not comparing cards before making an application, and losing £400m a year by not understanding calculation methods.
"The consumer is faced with a less-than-straightforward choice due to the number and complexity of the products," the OFT said.
According to the survey, the most common reason for consumers choosing a particular card is a recommendation by their bank.
It cited a report which calculated that the average customer stands to lose £137 a year by choosing the average priced credit card rather than the cheapest.
The super-complaint from Which? focussed on the different ways card providers calculate interest rates, which can result in the same APR costing consumers different amounts.
The OFT rejected the call for a standardised calculation method, but said it was apparent that consumers needed more help and encouragement to shop around.
Major changes
Following work with Which? and the card industry trade body Apacs, it recommended four major changes:
· the introduction of an independent credit card price comparison website run by the FSA
· improvements in how information is presented in credit card issuers' summary boxes
· standardisation of terminology used by credit card issuers in their product literature
· improvements to consumer education about the benefits of shopping around for a credit card
The OFT's chief executive, John Fingleton, said: "No one wants to throw money away, but consumers who don't shop around for credit cards are doing just that.
"It is essential that consumers are given the right tools to make comparisons between credit cards more easily, and we can achieve this through some of the recommendations announced today, which have received widespread support from the FSA, Apacs and the rest of the financial sector."
Apacs welcomed the OFT's report and said it would be working with the FSA to deliver the comparison site, which it said would be an important tool for consumers.
Sandra Quinn, a spokeswoman for Apacs, said the recommendations would build on changes the industry had already made, including the introduction of summary boxes on all credit card marketing.
"We are backing the OFT in hoping that these proposals will spur customers on to make better decisions, by building upon the work already undertaken by the industry to make credit card products more transparent," she said.
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