HC Deb 31 October 2002 vol 391 cc992-3
7. Mr. James Plaskitt (Warwick and Leamington)

What assessment she has made of the effectiveness of consumer and competition legislation in respect of credit cards. [76423]

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

Our legislation offers many safeguards. However, we are examining the present financial limits on credit card transactions, the number of exemptions, the activities of loan sharks, the advertising regulations and a number of other areas of concern. The consultation period lasts for another month and we welcome the contribution of all hon. Members.

Mr. Plaskitt

I am pleased to have my hon. Friend's reassurance on that matter. Does he share my concern about the misleading information issued by credit card companies? We looked at this in the Treasury Committee and found disturbing evidence. It is possible, for example, to have three different credit cards, all on the same annual percentage rate, borrow the same amount of money on each for the same length of time, yet the credit payment varies by up to 38 per cent. Is it time to look again at consumer and competition legislation and see if we can strengthen it to force the credit card companies to reveal the true cost of credit, whether it is used for the purchase of fireworks or anything else?

Nigel Griffiths

I read my hon. Friend's trenchant questioning on 1 May in the Treasury Committee, when he went into this matter in some detail. I am concerned that credit card providers are interpreting the regulations in different ways and that that is not helping credit card users. We want to be able to compare what is on offer and allow consumers to choose the best product for them. We will consult on this and on other changes in advertising requirements shortly.

Mr. Richard Allan (Sheffield, Hallam)

Does the Minister accept that, although the United Kingdom credit card market is highly competitive, there are valid concerns about the level of security in a system that, unlike those used in other countries, does not require the use of a personal identification number or other form of identification at the point of sale? Does he believe that credit card security can be left entirely to the market when the very fact of that competition may discourage credit card companies from imposing new, more onerous security requirements; or are the Government taking active steps to improve security, as credit cards increasingly become part of our daily lives?

Nigel Griffiths

Obviously, with billions of credit card transactions in Britain, the rest of Europe and the world, security is a very important issue for consumers, the credit companies themselves and the retailers, so I concur with the hon. Gentleman. We take the issue very seriously.

Mr. Peter Pike (Burnley)

But at a time when we have low inflation and a low interest rate nationally, does my hon. Friend believe that, instead of being bombarded with good, attractive short-term introductory offers through the post, at every motorway service station and every shop, those people who use credit cards should be given lower long-term interest rates and a fairer deal?

Nigel Griffiths

My hon. Friend makes a powerful point. The Treasury Committee highlighted those concerns and was particularly critical of the practice of inducing people to take out new credit cards at what appear to be artificially low rates of interest and then ratcheting up those rates. I am reliably informed that the present examples that credit card suppliers use for their own comparisons of APR are not based on the actual usage of cards; they are not the best tools for making comparisons, and I understand that the Office of Fair Trading is examining a number of those matters at the moment.