By Louise Greenwood BBC Radio 4's Money Box

Debenhams card customers could see their card change

The UK's biggest store card operator is considering converting them into full-blown credit cards, the BBC has discovered.

In late September 2003, GE Capital began a pilot scheme, sending upgraded store cards with a credit card facility to a selected group of Debenhams' two million card holders.

Marks & Spencer was also carrying out a similar exercise.

We believe that it should be the consumer making a conscious choice John Vickers, OFT

But the Office of Fair Trading (OFT) was unhappy that customers were being sent credit cards they had not asked for.

It demanded that both GE and Marks & Spencer spell out more clearly that customers did not have to accept the new cards.

John Vickers, Director of Fair Trading at the OFT, told BBC Radio 4's Money Box programme:

"The consumer who did nothing might find themselves with a credit card instead of a store card. We believe that it should be the consumer making a conscious choice."

New terms

In January - after being cautioned - GE Capital began a separate exercise, sending new terms and conditions to the majority of its Debenhams store card holders.

It stated in the small print that it has the right to upgrade all store cards to credit cards.

GE Capital, which declined to be interviewed by Money Box, described the change as a "housekeeping exercise" and said that when customers are issued with the new card they will have the opportunity to cancel it.

It is very subtly being slid through the door and people have got it without knowing Martin Lewis, Moneysaving Expert

But observers of the credit card market say this alteration of the small print could pave the way for a fundamental change.

Martin Lewis from Moneysaving Expert says many customers may not even realise they are being given a credit card.

"It is offering people - who do not really understand how it works - a lot more credit that can be spent in a lot more places.

"It is very subtly being slid through the door and people have got it without knowing."

Consumer decision

GE Capital insisted it does have the right to vary its terms and conditions, but the OFT said that the law in this area is "unclear".

I really would like the OFT to speak very seriously to Debenhams about this George Mudie MP

However, while the company's actions are not illegal, George Mudie MP, a member of the treasury select committee which has been examining store cards, told the programme he is unhappy:

"I really would like the OFT to speak very seriously to Debenhams about this.

"To obtain a credit card, it should be a conscious thought-out decision by the consumer, and this one takes part of the decision-making process away from the consumer."

Highly profitable

GE Capital told the programme it would never knowingly operate in a manner which contravened any laws or regulations, and stressed customers can cancel the cards at any time.

Going into credit cards makes an awful lot of sense for them Jonathan Charley, Unisys

But it did admit it may make similar changes to the terms of its many other store cards. And that would release hundreds of millions of pounds of consumer credit onto the market.

Jonathan Charley, a banking analyst at Unisys said there is a clear business reason for them getting a foothold in the market:

"Going into credit cards makes an awful lot of sense for them. Credit cards are highly profitable and also expand their ability beyond the store that they are operating in as a card.

"Secondly, it gives them a greater opportunity for cross-selling into other financial services products."

BBC Radio 4's Money Box was broadcast on Saturday, 27 March, 2004, at 1204 GMT.