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Wednesday 08 October, 2003

Office of Fair Trade

Marks and Spencer store cards

Office of Fair Trading
08 October 2003

128/03                                                            8 October 2003

          M&S agrees to amend conversion of store cards to credit cards

Marks and Spencer Financial Services plc (MSFS) has changed the way it will
offer to replace its store cards by the &More credit card after action by OFT.

MSFS had sent out letters to many card holders saying that its store card would
automatically be replaced by the &More credit card unless card holders objected.
Under section 51 of the Consumer Credit Act 1974 it is an offence to send a
credit token to a consumer unless it has been requested in writing.

MSFS considers that it was not contravening the law because it was not supplying
a new credit token but sending a replacement card as a result of a variation to
the existing store card agreement. The OFT view was that MSFS did not have the
right to change one type of card into another in this way.

MSFS has agreed to make changes to its plans. All store card holders being sent
the new &More card will now be told that, if they wish to keep their store card,
they need take no action. If they wish to replace the store card with the new
credit card, consumers must take positive action to activate it. This reduces
the element of inertia selling.

In addition, the OFT has challenged a standard term in the MSFS store card
agreement that purports to give MSFS an unrestricted unilateral right to change
the terms of the agreement. The OFT considers that this term was legally unfair
(see note 1). MSFS has, without accepting the OFT's view, given the OFT an
undertaking that it will amend the challenged term to limit its applicability.

The OFT is taking no further enforcement action at this time. It recognises that
there may be advantages to consumers in having the choice of replacing a store
card by a credit card with a lower APR as in this case.  The OFT also notes that
MSFS, in line with principles of responsible lending, has taken care to make a
proper credit assessment of individual cardholders being invited to change to
the &More credit card and on deciding credit limits.

John Vickers, OFT Chairman said:

'Inertia selling of credit can have damaging consequences for consumers. In this
case Marks and Spencer Financial Services has agreed to take practical steps so
that consumers will move from store card to credit card only if they positively
make that choice.'

1.   The Unfair Terms in Consumer Contracts Regulations (UTCCRs) came into force
     in 1999 (superseding the UTCCRs 1994) and apply to standard contract terms 
     used with consumers in contracts made after 1 July 1995. The UTCCRs protect 
     consumers against unfair standard terms in contracts they make with 

     The OFT, together with certain other bodies, can take legal action to 
     prevent the use of potentially unfair terms. A term is unfair if it causes 
     a significant imbalance in the parties' rights and obligations under the 
     contract, to the detriment of consumers. Standard terms may be drafted to 
     protect commercial needs but must also take account of the interests and 
     rights of consumers by going no further than is necessary to protect those 
     legitimate commercial interests. An unfair term in a contract covered by 
     the UTCCRs is not binding on the consumer. Ultimately, only a court can 
     decide whether a term is unfair.
2.   Part 8 to the Enterprise Act 2002 came into force on 20 June 2003, 
     replacing the consumer provisions of the Fair Trading Act and the Stop Now
     Regulations. The Enterprise Act improves consumer protection by giving 
     enforcers strengthened powers to obtain court orders against traders that 
     breach a range of consumer legislation; controlling activities such as 
     misleading advertising, misleading price indications, lotteries, sale of 
     goods and services, underage sales, estate agency, misleading health 
     claims, trade descriptions, mock auctions, timeshare, unfair terms in 
     consumer contracts, doorstep selling, distance selling, package travel and 
     consumer credit.

PUBLIC enquiries: 0845 7224499            [email protected]

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