Massive blitz on rip-off store cards

A HUGE clampdown on the 'rip-off' store cards issued by Britain's biggest retailers will be ordered this week.

A Government watchdog is to condemn loan shark-style interest rates of up to 32% and recommend sweeping regulation.

A six-month investigation by the Office of Fair Trading (OFT) has concluded that 10m holders of store cards from household names - such as Debenhams, Harrods, Comet, Harvey Nichols and Bhs - are paying massively over the odds.

The cards are by far the most expensive mainstream way to borrow money in Britain. The OFT began its investigation after its head John Vickers was upbraided by MPs on the Treasury Select Committee for not acting more quickly to curb abuses.

The committee accused shops of 'highway robbery' and of operating a 'cosy cartel' because the rates were so similar.

The probe is believed to have uncovered compelling evidence that the market is unhealthily dominated by one finance company, US-owned GE Consumer Finance, which provides about 60% of all store cards issued in Britain. The firm made about £90m profit from the cards in 2002.

Officials have also been looking at the way retailers sign up new store card accounts. They have been criticised for not disclosing the full terms of the cards, particularly interest rates. The rates have remained stuck around 25% to 30% for about five years, while base rates halved, though they have now started to rise again.

The cheapest store card is John Lewis's with a 13% rate that compares with the typical credit card rate of 12%.

Many issuers offer discounts on shopping bought with the card on the day it is taken out.

GE Consumer Finance has argued that interest rates are so high on store cards because of the high costs of operating them. The company claims to have already addressed many of the criticisms of the way they are sold.

However, a source at GE said it was under no illusions about the likely tone of the report. 'We are prepared for the worst,' he said.