High Street chains which charge "extortionate" interest rates on their store cards could face huge fines in the future under competition rules.

Consumer and competition watchdog the Office of Fair Trading said it was launching an informal inquiry into store cards following complaints raised by MPs.

A spokesman said: "It is an informal study of competition issues and selling issues with regard to store cards."

The inquiry could be followed by a formal investigation if uncompetitive practices are found and could lead to heavy fines under OFT rules.

The move follows complaints by the Commons Treasury select committee about the interest rates charged on store cards.

The committee heard some cards offered through retailers charged more than 32.5 per cent interest - significantly more than credit cards.

The average rate of interest is about 29 per cent but toy store chain Toys 'R' Us charges an APR of 32.5 per cent.

GE Consumer Finance, which operates store cards for retailers such as Debenhams, Bhs and Comet, told the committee it had not reduced its rates since April 1999 when the banks' base rate was about seven per cent. GE Consumer Finance operates cards on behalf of the Arcadia stores group - which owns Top Man and Top Shop - along with Laura Ashley, Mothercare, River Island and B&Q.

Friday September 12, 2003