The trading standards watchdog has ordered a review of competition in the store card industry.

A report by the Office of Fair Trading published on Thursday concluded there were "serious questions" for credit firms to answer over their charges and the level of competition.

Party Response: Liberal Democrats

Malcolm Bruce MP, Liberal Democrat trade and industry spokesman, said: "Customers are potentially paying £350million each year in excess interest payments on store cards alone.

"If you take into account all those who are using credit cards to pay for purchases, excess interest payments compared with competitive market rates could run into billions.

"This money is simply fuelling the profits of banks and credit companies instead of driving the real economy.

"It is in the retail sector's interest to address this as customers are paying off debts instead of buying more of goods and services.

"What the government must do is place a clear responsibility on the retailers and store card operators to inform their customers about the charges they can expect if they put purchases on cards with often extortionate rates of interest."

Forum Response: National Consumer Council

Claire Whyley of the NCC said: "The decision to refer store card services to the competition commission is good news for consumers and we welcome the OFT’s decisive action.

"Retailers and store card suppliers have been getting away with overcharging and failing to provide customers with clear information for far too long. It's high time they put their house in order.

"The proposed market investigation should ensure that consumers reap the benefits from increased competition and lower prices.

"Retailers must be upfront about costs, terms and conditions - before consumers sign up for a card, and while they are using them – so borrowers can decide whether store cards can offer them value for money.

"As most people don’t understand APRs, we especially welcome the proposed consumer education campaign."