Store cards Store cards too easy to obtain
All we had to do was sign the store card contracts
What our store card investigation found
Half of the 12 shops that gave out store cards offered one to James.
In total, he was able to get £2,750 worth of credit on store cards with interest rates ranging from 18.9% to 28.9%.
The highest of these was BHS, which offered James £1,500 in credit and sent him a credit card in the wrong name.
Of the 12 shops where James applied for credit, eight filled in the forms containing terms and conditions for him – only asking him to sign at the bottom. This arguably didn’t give him a proper chance to read important information – including a statement requesting his consent to perform a credit check.
Only one store, New Look, verbally informed him he would be credit checked.
The fact that he’d had 12 credit checks over two days didn’t seem to impact his chances of getting credit. Both New Look and Ikea offered him credit (£100 and £250 respectively) on the second day after he’d been credit checked by eight stores, and Argos offered him £250 after he’d been checked by five.
A poor way to borrow money
| Store cards | |||||||
|---|---|---|---|---|---|---|---|
| Provider | APRa | Credit offereda | Credit check done | Credit check permission asked? | Minimum monthly repayments | Time to pay off debtb | Time to pay off debt of £100c |
| Argos | 27.9% | £250 | Yes | No | 4% or £2 | 9 years 9 months | 6 years |
| BHS | 18.9% | £1,500 | Yes | No | 2.5% or £5 | 20 years 8 months | 2 years 2 months |
| IKEA | 19.9% | £250 | Yes | No | 3% or £3 | 9 years 1 months | 4 years 1 months |
| New Look | 28.9% | £100 | Yes | Yes | 3.65% or £3.65 | 3 years 8 months | 3 years 8 months |
| River Island | 19.9% | £300 | Yes | No | 4% or £4 | 6 years 5 months | 2 years 10 months |
| Topman | 19.9% | £350 | Yes | No | 4% or £4 | 7 years | 2 years 10 months |
Table notes
We sent a fieldworker around to apply for store cards. This table represents the stores he was accepted at.
- As offered to our fieldworker
- The length of time it would take to repay the amount of credit offered by paying the minimum repayments each month.
- At minimum repayment
Irresponsible lending?
We feel that if the companies were aware of James’ credit history and the credit he was accruing, then their decision to lend was irresponsible. If they were unaware of his history, either the system may have let them down or they appear to have been negligent by not carrying out any checks.
What’s more, though there was a lot of information in the documents handed to our fieldworker, none of the stores we visited verbally warned James about the high interest rates and the low minimum payments on the cards.
And none told him that they were unsuitable for borrowing. This could only be found in the small-print of the terms and conditions given to James.
Reassuringly, our investigation found that half of the shops offering store cards rejected our fieldworker. Yet the fact that he was able to accumulate so much credit is worrying.
In particular, that James was able to still get credit at the end of day two despite undergoing eight credit checks, is an indication that the credit checking system is not working properly.
Credit checks and small print
Most stores didn't give us time to read the small print
We are also concerned that only one shop verbally asked James’ consent to undertake a credit check. Multiple checks leave imprints on your credit file and can harm your chances of getting credit.
This is particularly important with store cards due to the circumstances under which people take out store credit.
Waiting in a queue in a busy shop is not the ideal place in which to read the small print on an application, and it is therefore crucial that the most important clauses are pointed out to the client verbally.
As James told us, he had no idea he was being credit checked.
Under the Data Protection Act, whenever personal data is to be used, the individual must give consent and be made aware of how it will be used. This ‘privacy notice’ should be presented in a fair and transparent way under the Information Commission Officer’s (ICO) code of practice.
And it should appear before and near to the signature box the customer is signing, so they are clear what they are agreeing to. On most forms James signed, this wasn’t the case.
BHS's poor handling of store cards
In our investigation, we found BHS to be the most lax in its handling of store cards. Our fieldworker James asked for a store card and was offered one with up to £100 worth of credit.
However, the store sent James a credit card with £1,500 worth of credit, rather than a store card. And when the card came in the post, it was in the name of Mr Woodland (the name of his road).
Like most of the shops we investigated, the assistant filled in most of the information for him and didn’t verbally inform him the store was making a credit check.
We asked BHS for a comment but, for privacy reasons, we couldn’t disclose details of our fieldworker.
A BHS spokesman told us: ‘It is our policy and intention to ensure that all customers making an application are aware that they will be credit scored.
'If this did not happen, we apologise and will be re-communicating the importance of this element to all staff. But, without further details, we can’t comment on the limit allocated or the name used in the application.’
It is worrying that BHS can send out a credit card with the wrong name, and we feel this shows a need for the store to tighten up its procedures for processing store card applications.
