January 18 2017 Latest news:
Adam Aiken, Editor
Tuesday, November 22, 2011
Consumer groups have long complained that the offer of big discounts at the till in return for signing up for store cards had led to many people taking up unsuitable offers.
Although the initial discounts can be tempting, store cards traditionally charge high interest rates, and they often prove to be uncompetitive products.
Under the new guidelines, offers such as free gifts, credits or discount vouchers will not be available for the first seven days after a card has been taken out.
Consumer minister Ed Davey said there was concern about customers being tempted by initial discounts into taking out the cards.
“Following negotiations with the government, the industry has agreed to end this practice as well as introducing other measures to improve the way store cards are offered, including a good practice training scheme and a ban on direct commission for sales staff,” he said.
However, the government stopped short of applying a cap on interest rates on these cards, because of the fear that a subsequent tightening of lending criteria would push consumers with lower credit ratings into the hands of other, more expensive lenders.
“The evidence showed that a cap would not be in the best interest of consumers as pricing some consumers out of the market could force individuals to seek unregulated or high cost credit,” Mr Davey said.
The Finance & Leasing Association, which represents store card providers, said the new measures would benefit shoppers.
Stephen Sklaroff, director-general of the FLA, said: “These new measures for store cards will ensure that consumers can continue to enjoy the many benefits that retailers offer on the high street.
“We have worked with the government, store card providers, retailers and consumer groups to agree a package of measures that allows customers to make informed decisions about whether a store card is right for them.
“This package will ensure that customers can continue to use store cards to help manage their high-street purchases effectively.”
British Retail Consortium director-general Stephen Robertson said: “Introducing a week-long separation between taking out a store card and receiving discounts is a common-sense compromise which will give people enhanced consumer protection with access to the benefits those cards provide.”