Summary

Some of the credit card industry's worse over-chargers have now ( personal secured loans ) been named and shamed by the Competition Commission. This article explains how some companies will be forced to change.

Credit Cards The industry is exposed for overcharging

Enough is enough - some credit card companies were over-charging

Store cards are the worst offenders, the most shocking interest rate standing at 30.9% - a whole 26.4% more than the Bank of England base rate. High-street haberdashery TJ Hughes had the highest interest rate, swiftly followed by the footwear retailer Faith, and then Owen & Owen. Take a look at the table of shame later on in this article, and you'll see them at the top.

The Commission is also putting an end to the overly enthusiastic ( mortgage ) charges for missed or late payments, and the rip-off that is Payment Protection Insurance. At the moment, the average charge per missed or late payment is £15 per time - but the Commission has rightly stated that these charges are unnecessarily high.

On the subject of Payment Protection Insurance (PPI), the Commission has joined forces with "Which", the consumer watchdog, the National Consumer Council and the Financial Services Authority in finding that credit card companies have abused the very notion of PPI, which is essentially a useful type of insurance. The Commission has changed the rules, disallowing credit ( mortgage rates ) card companies to sell PPI alongside a credit card; if customers want it, they must buy it separately. That's good news for the online insurers and good news for customers, because people can save on average 60% on their payment protection insurance online compared to the inflated prices charged by the credit card companies.

The Competition Commission has put five main changes into place, which are as follows:

•  Any credit card that has an interest rate over 25% must clearly state that there are other cheaper credit cards available. The statement must be made on each and every monthly statement.

•  Each monthly statement must clearly display the interest rate and penalty charges on the first page.

•  Each monthly statement must make it clear to the customer that if they only pay the minimum monthly payment, they will pay a lot more in the long run in interest.

•  Credit cards must allow their customers to pay off the whole balance on the card every month by direct debit. As a result, the customer would never have to pay any interest or penalties for missed payments etc.

•  Payment Protection Insurance will not be allowed to be sold as a combined package with the credit card. Anyone wanting to buy PPI would have to do it separately, so they can see the cost of the standalone policy.

So the Commission are not actually forcing credit card companies to slash their rates, but we think that all those cards that charge more than 25% will soon drop beneath that level. Most of the mainstream credit cards charge 14-18% on their credit cards, we think that's too high, but that is definitely not likely to change.

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