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Press releases 2002 -

Major credit card companies agree to change adverts

Greater clarity for introductory rates of interest

PN 10/02     20 February 2002

Twenty eight credit card companies have agreed to change the way they advertise introductory rates of interest. They include the major card issuers such as high street banks and finance houses.

The companies (named in note 1) have agreed not to describe introductory interest rates as APRs (annual percentage rate) after the OFT expressed concern that this practice breached consumer law and could mislead consumers. Examples of such adverts for introductory rates included phrases such as: '0% APR on balance transfers for six months' or '3% APR fixed until 1 July 2002'.

Consumer credit law says that the APR should measure the overall charge for credit, including interest and other charges over the lifetime of an agreement. A temporary interest rate therefore cannot be called an APR.

The OFT wrote to the credit card companies under its Stop Now powers which speed up action against businesses which do not comply with a range of existing consumer laws.

John Vickers, Director General of Fair Trading said:

'Straightforward advertising is vital for consumers and competition in the credit market. APRs allow consumers to compare deals in a clear and simple way. The OFT is pleased to have secured agreement to stop the misleading use of "introductory APRs". This shows how Stop Now powers can get positive, swift and proportionate results.'


1. The companies who have agreed to change their advertising are Abbey National plc, Alliance & Leicester plc, The Associates, Bank of Scotland, The Boots Company plc, Capital One Bank (Europe) plc, Clydesdale Bank plc, Direct Line Financial Services Ltd, Egg plc (Prudential Banking plc), Furness Building Society, Halifax plc, Hamilton Direct Bank, HFC Bank plc, HSBC Bank plc, Liverpool Victoria Friendly Society Ltd, Lloyds TSB Bank plc, MBNA Europe Bank Ltd, Morgan Stanley UK Group, National Westminster Bank plc, Nationwide Building Society, Paramount Bank, People's Bank of Connecticut, Providian National Bank, RBS Advanta, The Royal Bank of Scotland plc, Sainsbury's Bank plc, Tesco Personal Finance Ltd, Woolwich plc.

2.  Download the paper The OFT's Approach to Stop Now Orders: Consumer Credit Issues in pdf format (30 kb).  You can also download an annexe APR calculation in pdf format (16 kb)

3.  Under the Stop Now Regulations, the OFT can apply for a Court order against traders who breach or are threatening to breach a number of laws harming the collective interests of consumers covered by those laws. It can seek written assurances in lieu of court action. The Regulations cover the following areas: doorstep selling, timeshare, unfair contract terms, consumer credit, distance selling, package travel, package holidays and package tours, misleading and comparative advertising, sale of goods rights, TV broadcasting activities and advertising of medicinal products for human use.

4.  The APR means the annual percentage rate of charge for credit determined in accordance with the Consumer Credit (Total Charge for Credit) Regulations 1980 SI 1980/51 (as amended) and, in relation to advertising, Schedule 3 of the Consumer Credit (Advertisements) Regulations 1989. SI 1989/1125 (as amended).

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