STORE CARD issuers last night came under pressure to cut interest charges after Ikea slashed the rate on its card and the Competition Commission agreed to broaden its investigation into store cards.

The commission indicated that it would take into account the persistently high charges on store cards — in spite of two reductions in the base rate in recent months — in its investigation into whether store and credit cards form a single market.

GECF, which controls about half of the UK market, faces a possible break-up of its customer base if the commission finds that store and credit cards are separate markets.

Phil Evans, principal policy adviser for the Consumers’ Association, cited the “immunity” of the store-card sector from tracking base rates downwards as evidence of its separation from the credit card market. He said: “The fact that store-card interest rates have been immune to wider competition in the credit-card sector suggests that they are a separate market.”

Professor Paul Geroski, chairman of the Competition Commission, said that the stagnant interest rates offered by store cards would now become a focus of the commission’s investigations, which initially centred upon the relationship between retailers and store card issuers and the way in which cards are distributed by providers.

GECF, whose clients include Bhs, Laura Ashley and Arcadia, would not be drawn on whether it would follow Ikano Financial Services, which manages the Ikea card, and reduce charges.

GECF, which has been attacked by MPs and consumer groups for charging interest rates of about 25 per cent, said over-limit and late-payment charges were the key factors in determining the cost of credit. HSBC, its major rival, also said that it had no plans to reduce rates on John Lewis or Harvey Nichols cards.

However, Ikano Financial Services, which slashed the interest rate on the Ikea store card from 26.8 per cent to 12.9 per cent, admitted it would consider reducing the rates on cards it operates for Allders, Habitat and Oasis.

The Competition Commission’s inquiry, which follows an Office of Fair Trading market study, is the first carried out under the Enterprise Act 2002 and will assess if features of the market “distort, restrict or prevent competition”.

GECF used yesterday’s open hearing to emphasise that store cards formed part of the wider consumer credit market, highlighting that 98 per cent of store card owners also used other types of borrowing.

Brad Cooper, chief executive of GECF, attacked what he viewed as emotive newspaper headlines describing the lender as a “market giant” when the store-card sector accounted for less than 2 per cent of consumer borrowing.

He said that an investigation of store cards in isolation would be “too narrow”.

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