The Impact of Regulatory Intervention in the UK Store Card Industry

The paper examines the impact of regulatory intervention on store card interest rates, for a panel of UK store cards. The analysis is timely given the public attention that high store card interest rates have attracted in the UK, and the enquiries by the Office of Fair Trading and the Competition Commission into the industry. Panel data Tobit estimation methods are used in conjunction with intervention analysis so that the impact of the investigations on store card interest rates can be examined. Results suggest that there is a significant negative impact on store card interest rates of approximately 4%. The impact of macroeconomic factors and credit card interest rates on store card interest rates are also taken into account, results indicating that store cards and credit cards should be considered as competing sources of credit.