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Last Updated: Thursday, 16 October, 2003, 07:25 GMT 08:25 UK
Q&A: Big banks and credit cards
The heads of four big UK High Street banks have to justify their high credit card charges before the influential Treasury Select Committee on Thursday. BBC News Online examines what the controversy is about.

Why are the chief executives being interviewed?

Bank of England interest rates are now at a forty year low, and big banks can borrow more cheaply than ever before.

However they stand accused of not passing on this boon to their credit card customers in the form of lower Annual Percentage Rates (APR).

In short the banks will be asked whether they offer their customers a fair deal.

And there is another crucial issue: The size of UK consumer debt is rising sharply, and MPs may ask whether banks are cautious enough.

Some experts worry that people are getting loans who may not be able to pay them back.

But I thought lots of credit cards had swanky special offers attached?

The credit card market is more competitive than ever.

In the mid 1990's new entrants, many from the United States, started to tempt customers with special offers and low introductory APRs.

People flocked to the new providers in their droves, although many kept their old credit cards with the big four banks.

In fact, the big four banks, thanks in part to their stranglehold on the current account market, still retain by far the biggest slice of the credit card market.

Unfortunately, as rule of thumb the big banks offer rates that are a long way from the most competitive credit cards on the market.

Is it only the big banks that are being investigated?

Not at all, in the summer the Treasury Select committee hauled the store card industry over the coals.

Leading card issuers were accused of being 'designer loan sharks' for the APR rates they charged store card customers.

Following on from the Select Committee mauling, the Office of Fair Trading launched an inquiry into the store card market.

The OFT now wants to find out whether the industry engages in "unsatisfactory practices", and whether it is competitive enough.

But isn't that all talk? Can the MPs really get things changed?

At first glance the answer is "no". They can't order firms to change their lending practices.

In truth, the real legislative work is going on behind the scenes as the government prepares an update of the 1974 Consumer Credit Act.

The Act in its present form has been roundly criticised by consumer groups as lacking teeth and being behind the times.

The government has already indicated that the update will include tough measures to clamp down on loan sharks.

The Select Committee, through its examination of the UK credit and store card markets, could have an indirect influence on the shaping of an updated Consumer Credit Act.

Is that all? What else can they do?

Well, plans for so-called "honesty" tables, aimed at making card charges more transparent, were brought forward following criticism by the Committee.

In August Apacs, a credit card industry body, told BBC News Online that it planed to introduce the tables, also known as Schumer boxes, in early 2004 - two years earlier than planned.

A Schumer Box draws together all the disclosures spread throughout the small print of a credit agreement into a box format, the idea being that such presentation makes it easy to understand and to compare different credit card products.

John McFall MP, chairman of the Treasury Select Committee, had written to leading card issuers asking them to bring forward the launch of the new format to show credit card charges.

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