Carry on misleading

By HELEN LOVELESS, MAIL ON SUNDAY ENTERPRISE EDITOR
Updated:

 

NEW rules came into force yesterday controlling the way credit cards are advertised. The aim is to make it easier for customers to know exactly what they are applying for.

But even before they are introduced, the new regulations have been slammed as toothless. The main criticism is that card firms will still be able to advertise attractive deals that are available only to a tiny proportion of applicants.

Last week, Financial Mail highlighted Capital One's admission to MPs on the Treasury Select Committee that only 28% of applicants for its No-Hassle MasterCard are offered the best-buy rate of 6.9%.

Forty% of applicants are offered a more expensive deal and the rest are rejected.

Before today, if a lender advertised a credit card with a certain rate, it had to make sure at least 50% of the applicants who pass its credit checks were given the deal.

This has been raised to 66%, in theory making advertised card deals available to more people. But the rules say nothing about how strictly the card company applies its credit checks.

This means that some companies can continue to promote certain cards as best buys when they are available only to a minority of applicants.

Meanwhile, many of those rejected for the best buy are offered more expensive plastic.

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American-owned Capital One says it has reviewed its processes in advance of the new rules. It promises that its typical APR of 6.9% will be received by 'at least 66% of consumers who get a card with us'.

Financial data provider Moneyfacts is concerned about the effectiveness of the regulations. It will ask the Office of Fair Trading this week how it intends to ensure that lenders play by the new rules.

Andrew Hagger, Moneyfacts' card researcher, says: 'We need to know whether card companies are complying. With this information we can drop card deals that do not comply with the rules from our best-buy tables.

'The new regulations are a step in the right direction, but I wouldn't pin my hopes on them making a difference unless they are properly policed.'

The Office of Fair Trading says it will carry out regular checks on card issuers. It also advises people who believe they have been misled by a promotion to contact their local trading standards office.

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