One in five credit card ads breaks law

One in five credit card advertisements breaks the law, a watchdog claims today.

Monitoring by the Office of Fair Trading found that 20 per cent of all credit card adverts placed in newspapers "contained nontechnical breaches of the law".

The shock finding has already triggered a wider investigation involving Trading Standards officers into advertising of credit cards and other forms of borrowing, it was announced today.

The OFT's conclusions suggest millions of borrowers are being persuaded to get deeper into debt by illegal marketing.

The breaches of the law are thought to centre mainly around claims of interest-free credit, and APRs - annual percentage rates - on advertising of introductory credit card interest rates. Three companies have already been identified for breaches of the law - Barclaycard for its 0 per cent forever campaign, Marks & Spencer and GE Capital. The OFT said that "a number of other cases are under investigation".

The findings came in the OFT's response to the Treasury select committee's highly critical reports on credit card charges published last December. That report claimed that interest rates charged by some issuers for credit and store cards were excessive, and that the lack of transparency in the marketing of some cards meant that consumers were "sleepwalking into debt".

The committee also criticised the "passivity" of the OFT in its regulation of the credit card industry.

Barclays chief executive Matt Barrett famously told the select committee he had advised his children-not to run up credit card debt because it was "too expensive".

Liberal Democrats Treasury spokesman Vince Cable said credit card companies "are deliberately confusing customers and profiteering from the muddle. The Department of Trade and Industry needs to standardise charges. That is the only way we will get through this problem."

In a separate report today, the OFT uncovered widespread confusion among credit card holders about the cost of their borrowing.

In a survey of more than 1,800 people, three-quarters could not identify the APR they were paying. Seven out of 10 said they had at least one card and 30 per cent said they had two or more.