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After announcing the conclusion of their investigation into store credit cards, the Competition Commission (CC) has clamped down on high street retailers ordering them to provide a rate warning if their annual percentage rate exceeds 25%.

There are 14 million store card owners in the UK, who have a total debt worth £2.5 billion to 70 major high street shops and chains. Many are paying interest rates of 30%, which is far higher than those charged by the major credit card companies. According to the CC, the interest rates are higher than necessary to cover “reasonable” costs and still make a profit. The CC also felt that store credit card rates would likely be lower if there were more competition in the sector.

The CC acknowledged the improvements in the card lending rates in the two years since it first launched its investigation, but said that UK borrowers were still being overcharged by at least £55 million a year.

Now, the CC has instructed retailers issuing store cards with an annual percentage rate of 25% or more, that they must warn customers they can get cheaper credit elsewhere.

In the future, not only will lenders have to issue an interest rate warning, but they will have to make it easier for customers to pay their store card debts by direct debit, as well as provide more detailed and clearer information on their monthly credit card statements.

The UK Consumers Association welcomed the 25% "rate warning" move, but pointed out that store cards were an expensive way to borrow money and should be “avoided at all costs.” They also argued that with credit card APRs averaging at 15%, too many people would be paying between 15% and 25% interest with no warning at all.