News: Watchdog fires plastic bullets over store cards

Government spends £4m to resuscitate struggling savings plans; self-assessment deadline looms; online lending exchange claims 18,000 members

British consumers are forking out £100m a year more than they should do on high-street store cards, it emerged last week.

Evidence that shoppers pay far too much interest on both the cards themselves and the bolt-on insurance has been un- earthed, according to the provisional findings of a long-running investigation into the market by the Competition Commission.

The annual percentage rates (APRs) charged on the cards are often as high as 30 - which can work out between 10 and 20 percentage points higher than if they simply reflected the providers' costs.

A lack of pressure on retailers and lenders to reduce the APR charged is to blame, the commission reported.

Although its investigation has already prompted some of the major card providers to lower their APRs, the commission proposed new measures to protect consumers. These include full disclosure of all costs and warning notices on card statements; and possible alerts to cheaper credit being available elsewhere.

"There is little competitive pressure on either APRs or insurance," said deputy chairman Christopher Clarke. "Retailers' primary concern is to avoid having an APR on their store card above those of other store cards.

"But consumers' sensitivity to APR levels and other charges is low."

Anyone looking to take advantage of the discount offered at the point of sale should ensure that they pay off the store-card debt immediately, urged a spokesman for the price-comparison service moneysupermarket.com.

Saving stakeholders

The Government has launched a multi-million- pound television advertising campaign to boost sales of its flagging stakeholder savings products.

Unveiled last Wednesday, "Stakeholder saving - it all adds up" will cost £4m. The campaign includes a leaflet and website promotion alongside advertisements on national TV.

The drive to raise consumer awareness is intended to encourage more Britons, particularly those on low to middle incomes, to take out one of a range of stakeholder products.

They include a cash deposit account, a pension plan, a medium-term investment vehicle and the child trust fund. The last two both invest in the stock market but all are simple, low-cost and risk-controlled savings and investments. The maximum annual charge on the full range of products is just 1.5 per cent.

The first stakeholder pension was launched in April 2001, and some 2.5 million policies have since been taken out. But the numbers are far below expectations.

The child trust fund has fared better, but only half the £250 vouchers sent out to parents of children born on or after 1 September 2002 have so far been invested.

The medium-term investment products, meanwhile, have proved a non-starter, with only a handful of providers bothering to offer them.

The disappointing sales are the result of lukewarm support from the financial services industry - it's difficult to make a healthy profit on low charges - combined with wide-spread public ignorance and indifference.

The British Bankers' Association welcomed the government campaign but said the stakeholder range needed to expand to include capital-protected products.

Tax warning

Taxpayers must act quickly if they want the Inland Revenue to do their self-assessment sums for them: there is less than a fortnight left to file the annual returns.

The deadline for the 2004-05 tax forms and payment of tax owed is not until 31 January, but those who send paper-based returns in by 30 September will have their bills calculated for them.

If you file online, however, you've got until the end of December.

Miss the Friday 30 Sep- tember deadline and you could land yourself with a long and painstaking task to calculate what you owe.

Many people will have received the new "short form", aimed at simplifying the self-assessment process. But the Associ- ation of Chartered Certified Accountants (ACCA) has warned that many people, particularly pensioners, could easily get confused when filling in the forms and overpay on their tax bill.

Errors on self-assessment returns will cost taxpayers £308m this year, estimates IFA Promotion, a marketing body for financial advisers. Those who fail to complete their forms accurately by the 31 January deadline face substantial fines, warns IFAP chief executive David Elms.

Zopa opera

Zopa, the UK's first online lending and borrowing exchange between individ- uals, has acquired 18,000 members since its launch in March this year.

The Zone of Possible Agreement enables people to set their own rates, for borrowing and lending, directly with each other.

Last week, a loan for £1,000 over 12 months was available to borrowers at an APR of 4.9, topping financial analyst Defaqto's "best buy" tables.

"Our members are telling us that banks don't have their best interests at heart," said Zopa chief executive Richard Duvall, the man who set up Egg.

"They resent the profits banks are taking out of the system and they dislike dealing with faceless corporations."

Meanwhile, holders of the distinctively shaped Mint credit card can't use it at a number of automatic payment machines, it has emerged.

The Mc2 card - which has its bottom right-hand corner shaved off - isn't accepted by a range of ticket vending machines, such as those situated in train stations and cinemas.

A Mint spokeswoman attributed the problem to the card's new design, saying a minority of machines were unable to read it as the technology had not caught up.

She added that Mc2 was accepted by all ATMs and that, while customers were being made aware of the problem with certain machines, the card was still extremely popular.