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February 11, 2008

OFT acts on credit card small print

by Gill Montia

Story link: OFT acts on credit card small print

The Office of Fair Trading (OFT) has warned High Street banks that their credit card terms and conditions are confusing consumers.

It estimates that undetected terms and conditions contained in small-print are costing cardholders £400 million a year and the watchdog is now demanding that providers include an “honesty box” on statements and marketing material.

This will provide a clear method of setting out rates and fees rather than presenting the information in complex small-print.

The OFT also wants banks and credit card companies to assist consumers by using the same terminology to describe charges and conditions and is setting up a price comparison website that will allow consumers to enter details of their normal spending and payment patterns and identify the card that provides the best value.

According to recent research, almost 70% of people do not shop around for a credit card. Many are put off by the volumes of reading required to identify the card provider that meets their needs at least cost.

Consumers who use a card charging above the best-value option are losing an average of £137 a year, giving an extra £400 million to card firms.

The OFT is concerned that this only adds to credit card debt, which now exceeds £66 billion.

This view is backed by the Financial Services Authority, which has already concluded that: “providers of financial products may gain from the lack of price transparency about their products … it may be in the provider’s interest to increase the complexity of the product charges”.

 

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