Dixons ditches the 'free' deals

It's out with the "interest free option" and "0% credit deals" and in with the "interest option plan" following an agreement between the Office of Fair Trading and high street store giant Dixons Group and two furniture companies.

Retailers have run into flak for not warning customers that "free credit" could be costly if conditions were not followed. "If the lump sum was not paid off in full at the end of the interest-free period, interest was charged for the whole period of the loan," the OFT says. "We take the view that such adverts break the law and can mislead."

Shoppers have complained that they can end up paying twice as much if they fail to pay the balance on time.

Dixons, which includes Currys, PC World and The Link, believes its material has been clear. It has promotions where a 0% monthly payment is made for a fixed number of months and the balance has to be paid after that - or the whole deal reverts to an expensive four-year loan at 29.5%.

It says: "We send reminders explaining what will happen. We offer grace periods in some circumstances in line with the Finance and Leasing Association code".

Dixons will use the headline "interest option plan" in publicity although the details remain unchanged. John Vickers, Director General of Fair Trading, says: "When a consumer signs an interest-free deal they need to know they are getting just that."

Other companies in electrical and furniture retailing are expected to comply with the OFT ruling.