Crackdown on credit card 'teaser' rates

The Office of Fair Trading this week came to the rescue of consumers bamboozled by confusing and misleading advertising used by credit card companies and banks to promote introductory or "teaser" offers.

The watchdog has used new "stop now" powers to crack down on those companies wrongly advertising introductory interest rates - in particular 0% interest deals for the first few months of a credit agreement - as annual percentage rates, or APRs.

The new powers came into force last June and the OFT immediately contacted 28 companies it identified as flouting regulations and instructed them to change their advertising.

They were told that the average APR should be as prominent in an advertisment as any reference to the introductory offer and were also issued with guidelines on how to comply.

Thousands of people have taken out new credit cards or transferred existing debts in response to a deluge of offers from a variety of companies, and the OFT says it will force all lenders to clarify the true cost of repayments - particularly when higher rates of interest can push up the cost of a loan significantly after the introductory period has expired.

The action follows eight months of negotiations with the banking and credit card industry and comes close on the heels of last week's government report calling for changes to the way APRs are calculated to make proper, like for like comparisons between lenders possible.

Director general of the OFT, John Vickers, said the new powers would lead to "speedier and more effective" action against any company in breach of consumer credit law.