MPs yesterday accused store card providers of operating a “cosy cartel” that “fleeces the young” with high-cost credit.

Members of the Treasury Select Committee also pointed to the large profits earned by retailers on their store card businesses.

GE Consumer Finance (GECF), which is behind half of all store cards in the UK including those of Bhs and Arcadia, rejected allegations of an industry cartel. A spokesman said that the number of loyalty schemes available proved that the market was competitive.

Norman Lamb MP (Lib, North Norfolk), said: “This market looks horribly like a cartel. Interest rates are clustered around the 30 per cent mark and the fact that GECF has 50 per cent of the market is not good for competition.

“Rates have fallen in the wider credit card market while store card rates have remained on hold.”

MP’s attacked GECF’s admission that its store card rates had remained on hold since April 1999, while the base rate has halved to 3.5 per cent during this period.

GECF justified freezing rates on the grounds that that costs of funds represented only 15 per cent of its overall costs of managing its store card business.

House of Fraser yesterday admitted that its store card business made a profit of £13.5m on turnover of £20m last year.

“These are designer goods financed by designer loan sharks,” said James Plaskitt MP (Lab, Warwick and Leamington).

John McFall MP (Lab, Dumbarton) chairman of the committee, attacked House of Fraser and other store card providers for “preying on young vulnerable consumers” while not informing them of the cost of credit.

“You wash your hands of debt problems and do not have a policy to ensure young people have an appropriate level of debt,” he said.

Mr McFall said three hours staff training for employees selling the card was insufficient.

Richard Wayment, director of retail sales at House of Fraser, said the retailer would review its code of practice and improve the level of information provided to the consumer.

Mr McFall highlighted how House of Fraser’s marketing literature failed to reveal the level of interest on its cards.

Mr Wayment also backed down after claiming that credit laws forbid retailers from allowing customers to take store card credit agreements home before signing.

He said this procedure would be reviewed to enable customers to make a more informed choice before signing up for credit.