Politicians and consumer groups have expressed anger and outrage at high street stores which are accepting ‘credit vouchers’ which are repaid by borrowers at an annual percentage rate (APR) of 222%. This is a rate more than 10 times higher than a typical credit card.

On learning of the reaction to the scheme, the top retailer Arcadia, which owns Burton and Topshop, decided to end its participation. Stores which are still accepting the vouchers at the time of writing include Comet, B&Q, Mothercare and Woolworths among 92 others.

Argos has also attracted criticism over its storecard, which is run by the doorstep lender Provident Personal Credit. The lender, based in Bradford, West Yorkshire, is a major provider of cash loans which are then collected at customers homes on a weekly basis.

This new product. the ‘Easy Shop Card’ can only be used at Argos, and seems to be targeted at low-income families who would have difficulties in obtaining mainstream loans. The amounts available to be borrowed are between £100 and £500. As with their loans, Provident collects repayments from clients at home each week.

The card is criticised because of the repayments required - a customer borrowing £100 and paying it back in weekly instalments of £5 would need to make 27 payments - a total of £135. This equates to an APR of 222%.

The card scheme was described as “wicked” by the Liberal Democrat Treasury spokesman Vince Cable. He also said, “There is a real risk of a very large number of people being exploited. It is wicked to be promoting such high-interest cards and loans at Christmas, when people feel under pressure.”

A spokesman for Argos attempted to distance the company from the card,saying: We are not involved in offering the credit facilities, determining credit worthiness or setting interest rates for the card. Nor do we manage any marketing or promotion of the card. The Easy Shop card is not promoted on the Argos website or in any other Argos marketing materials as it is a Provident product.”

Provident spokesman David Stevenson defended the card: “When you take out a loan with us it never rises, even if you default,” he said. “These are not credit cards. They are pre-pay cards and high-street vouchers, and everybody knows that APR is not useful for comparing small loans that are repayable over a short term.”

This entry was posted on Thursday, November 6th, 2008 at 6:08 pm and is filed under General Credit Card News, Store Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.