Credit Card Firms Accused OF Confusing Customers
February 22, 2008
The Office of Fair Trading (OFT) reckons that credit card companies are taking £400m a year from customers by confusing them with small-print jargon and unfair charges. It means that many people pay more for their cards than they need to.
The OFT has unveiled a regime to help keep people clear of unfair cards, creating a price comparison website, and ‘honesty box’ on statements and marketing material which will spell out rates and fees clearly.
The website will enable customers to put in details of their spending and payment habits and it will identify the best card for them.
The OFT suggests that card firms should all use the same terminology to describe features, charges and conditions – and try to avoid confusing customers. According to the OFT, only 30% of people shop around for the best card for their circumstances, with many card providers making life difficult. Consumers choosing a card with a typical interest rate rather than a good deal are charged on average £137 more interest a year, making £400m in total for card firms.
The OFT report said: “Most consumers are not choosing effectively between credit card products. If consumers did shop around for a card, they could make substantial savings.” It went on to say that the Financial Services Authority had warned that “providers of financial products may gain from the lack of price transparency about their products”, and that “it may be in the provider’s interest to increase the complexity of the product charges.”
The OFT said that card providers can create “noise” with increasing complexity and volume of information which confuses customers.
OFT chief executive John Fingleton said: “No one wants to throw money away but consumers who don’t shop around for cards are doing just that.”
In the current environment it is dangerous for consumers to run close to the wind as any mistake with credit could impair their credit history and make future loans difficult to get
