MPs condemn 'rip-off ' credit rates on cards.

Byline: SEAN POULTER

SKY-HIGH interest rates and hidden charges on credit and store cards have come under attack by MPs and consumer groups.

Retailers are charging up to 31.9 per cent on store cards while major banks demand more than 15 per cent on the most popular credit cards.

The rates are condemned by MPs on a committee investigating personal finance scams as 'outrageous rip-offs'.

Consumer groups have joined forces to accuse banks and retailers of fuelling a national debt crisis.

They point out that interest rates on credit and store cards are at least four times higher than the Bank of England base rate of 3.75 per cent - which is at a 40-year low.

Electrical store Comet charges 31.9 per cent for its store card, while clothes retailers such as Laura Ashley and Monsoon charge 30.7 per cent, according to evidence supplied to the committee.

The Bhs chain, run by retail billionaire Philip Green, charges 28 per cent.

Labour MP George Mudie said: 'These are outrageously ripping off consumers.

How can they justify these interest rates?' Labour MP Angela Eagle said the annual percentage rates on store and credit cards were misleading to consumers.

She added: 'There are an extraordinary array of repayment methods that make it impossible for consumers to make informed choices.' Britain is the third-biggest user of credit cards behind the U.S.

and Canada. Figures this week revealed that a record [pounds sterling]11billion was spent on credit cards in May, while the amount owed on them rose by [pounds sterling] 823million to almost [pounds sterling]50billion.

A recent survey by Citizens Advice found that credit cards are now the main cause of consumer debt.

The Consumers' Association told the committee the five biggest banks - Lloyds TSB, Barclays, HSBC, RBS-Natwest and HBOS - charge much higher rates for credit cards than smaller competitors.

'Our data collected over the last 11 years shows that average credit-card rates among the big five issuers were consistently three to four times the Bank of England base rate,' the watchdog said.

The big banks were charging rates of 16 to 18 per cent earlier this year - much higher than the 8 to 9 per cent charged by Internet rivals such as Cahoot and Intelligent Finance.

Despite this, the big five still account for 63 per cent of the 59million cards in circulation.

The National Consumer Council is calling on MPs to back a new watchdog or extra powers for the Office of Fair Trading to regulate fees on credit and debit cards.

Chancellor Gordon Brown announced in August 2001 that he would give the OFT new powers but he has done nothing about it since.

The NCC's policy research chief, Frances Harrison, said banks and retailers are offering credit cards to people regardless of whether they want or need them.

Too often, advertising boasts low or nil interest rates for new customers without spelling out the long-term rate, she added.

The NCC is concerned that hidden charges in the small print can soon send debt spiralling out of control.

These include penalty fees of [pounds sterling]20 for going over credit limits and charges of 2 to 3 per cent of the value of cash advances and 2.75 per cent for overseas purchases.

s.poulter@dailymail.co.uk