Store cards 'overcharge by £100m

Store card holders are being overcharged by £100 million a year, a report from the Competition Commission concluded last week. Interest rates on store cards are up to 20 per cent higher than they need be to reflect the providers' true costs. Most store cards charge interest rates of about 30 per cent, it said, and there is little competitive pressure on providers to reduce these rates. It wants providers to give better, clearer information on store card statements about interest and any insurance charged and to clarify the option of paying outstanding balances by direct debit.

At the end of last year there were almost 14 million active store card accounts with outstanding balances of about £2.5bn. Fifty-seven per cent of store card holders pay interest on their card balances each month, the commission found.

The store card with the lowest interest rate is Ikea's at 12.9 per cent, according to data providers Moneyfacts. This compares to 30.9 per cent (27.8 per cent if paid by direct debit) on any of the cards offered by more than 30 stores, including HMV, Allders and Sainsbury's, operated by Creation Financial Services.

'While we support these findings, the recommendations do not go far enough. What we need at the bare minimum is an industry-wide code to stop what amounts to store card mis-selling and we are surprised that the Competition Commission stops well short of calling for this,' said Phil Evans from Which?. 'Store cards are an unnecessary and extremely expensive way to borrow and we have always advised people not to use them.'

The Competition Commission is giving interested parties until 11 October to comment on its findings and will publish a final report by March.

Payment cover probe plea

Citizen's Advice has called on the Office of Fair Trading to open an investigation into payment protection insurance (PPI), saying that it adds to people's debt problems rather than providing peace of mind.

The sale of PPI is commonly linked to credit products such as cards and loans and is supposed to protect the borrower against the risk that they will be unable to make repayments for reasons such as unemployment or incapacity to work through illness or disability.

But Citizen's Advice says the policies are often designed to exclude many of the most common situations that can lead to debt problems and are often mis-sold to people who cannot possibly claim on it.

The premium paid for the insurance can be as much as 25 per cent of the loan, it says. Moneyfacts gives one example showing that a £7,500 loan with Royal Bank of Scotland taken over five years costs £158.43 a month to pay back without insurance and £201.53 with. The cost of insurance over the term of the loan is £2,586.

Citizen's Advice estimates that there are 20 million policies in force and that they earn providers a revenue in excess of £5bn.

Log on to tune in for TV licence

Parents of students heading off to university for the first time are being urged to remind their offspring that they need to buy a TV licence if they are going to watch their own television set.

TV Licensing says its recent research shows that only 15 per cent of students think the responsibility for buying a licence while they are at university should fall on their shoulders - yet failure to do so could incur a £1,000 fine.

Students can arrange a licence by calling 0870 242 1417 or by going to www.tvlicensing.co.uk/students.

Taxman profits from IT mistake

HM Revenue & Customs, previously the Inland Revenue, has admitted to accidentally deleting almost one million records for taxpayers who changed jobs between 1997 and 2000, with the result that some taxpayers will not have received the repayment to which they were entitled and others owe tax that will now not be collected.

The confession came in a report submitted to the House of Commons and said the Revenue estimates that as a result of the deletions 365,000 people have overpaid by a total of £82m while a further 22,000 have underpaid by around £6m.

The deleted tax cases add to the Revenue's well publicised troubles with IT. When the tax credits scheme went live in 2003 several hundred thousand claimaints received payments well after they were due, while others were credited incorrectly and then asked to pay the money back.

'We have decided not to pursue the cases earlier than the year 2000 because of the complexity and costs of doing so,' said a Revenue spokesman. 'However, all of those whose records were deleted would have been given a P45 at the time which clearly sets out what to do if they wished to claim a repayment.'