21 March 2014
OFT inquiry into credit cards has only dealt with half the problem
Although the Budget has rightly consumed all the space in this week's financial pages, the Office of Fair Trading slipped out it's own interesting piece of news yesterday - revealing it had fined 17 banks and building societies for not giving their customers all the information they should have done when they took out a credit card.
As a result, the 17 offenders have been ordered to pay back almost £150m in default fees and charges to their customers.
It's great that the OFT has seized on this issue of transparency in the credit card market. But the information that providers give to companies once they've applied and been accepted, is only half the problem. When rating credit card companies on transparency over the past few months, Fairer Finance's team found that most card providers are also very bad at giving you key bit of information about their products before you apply. Naturally, it's vital that you've got all the facts once you've followed through and been accepted for a card, but it's really important that card providers give customers all the information they need upfront, so that they can decide whether or not they want to take out a card in the first place.
Where's the summary box?
It must be at least a decade now since the OFT forced card providers to create summary boxes for credit cards - which contain all the key information about cards in a standardised, simple format.
But trying to find the summary box for credit cards is not always as easy as it should be. Only seven card of the 30 providers we looked at include the summary box on the web page for each of their credit cards. Many do at least make it available only a click away. But a number only include it in the terms and conditions document, and some don't make it available until you've started the application. In one case, we couldn't find the summary box anywhere.
This should be information that every card provider is happy to present up front. How much do you get charged for using your card overseas? How much do you get charged if you miss a payment? How much interest do you get charged for cash withdrawals? These are not things that consumers should have to wait to find out once their application has been accepted.
Over to the FCA
The OFT has had something of a patchy record when it comes to its regulation of the credit industry. While it's managed to create a fairly robust regulatory regime around credit cards, it's not always been so good at enforcing. When the FCA takes charge of regulating this sector next month, transparency should be near the top of the list for issues to take a look at.