22/11/2011 00:58 GMT | Updated 21/01/2012 05:12 GMT

Shops To Stop Offering 'Tempting' Store Card Discounts For Shoppers

Shops will stop offering discounts to encourage customers to sign up for store cards under a voluntary deal after talks with the Government.

But there will not be a cap the rate of interest that can be charged on the cards, consumer minister Ed Davey told MPs.

He also unveiled plans for banks to warn customers approaching their overdraft limits to help them avoid extra charges.

In a written statement to Parliament he said people responding a government review on consumer credit were "concerned about customers being tempted" by stores offering discounts at the time they take out a store card.

"Following negotiations with the Government, industry has agreed to end this practice as well as introducing other measures to improve the way store cards are offered, including a good practice training scheme and a ban on direct commission for sale staff."

The end to discounts being offered within the first week of taking out a card would be brought in from the second quarter of 2012/13, along with the ban on commissions, the British Retail Consortium (BRC) said.

BRC director general Stephen Robertson said: "Introducing a week-long separation between taking out a store card and receiving discounts is a common sense compromise which will give people enhanced consumer protection with access to the benefits those cards provide."

Mr Davey ruled out a cap on the interest rates charged on credit cards, whether issued by shops or banks, warning it could drive people to use loan sharks.

Mr Davey said: "The Government will not be introducing a cap on interest rates on credit and store cards. Following the review, the evidence showed that a cap would not be in the best interest of consumers as pricing some consumers out of the market could force individuals to seek unregulated or high cost credit."

Mr Davey said under the new arrangement on overdraft warnings, banks will send an alert to customers to help them avoid going over their limit and incurring an extra charge. Account holders will also no longer be charged for going over their limit by a small amount.