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.

Concerns were so strong that it has referred the report to the Competition Commission.

"The gap between rates on store card borrowing and credit card borrowing may be more than can be explained by additional costs or the value of other benefits to store card holders," said the OFT.

The report followed heavy criticism by MPs on the treasury select committee in July last year over interest rates and fines for late payments levied by a business worth £4.8 billion.

MPs accused the credit firms that run store card schemes of "highway robbery" and "fleecing customers" with interest rates eight-and-a-half times above than the Bank of England base rate.

There was concern that one particular firm, GE Capital, held more than 50 per cent of the market and all the firms charged broadly similar rates.

Contracts running for more than 10 years and penalties for moving to another lender were restricting competition, the OFT concluded.

Customers were rarely given full information about what they were signing up for.

"The OFT believes that there are particular transparency issues specific to the provision of consumer credit through store cards," said the report.

The Liberal Democrats backed the decision to bring in the Competition Commission.

"Store cards are amongst the worst offenders in the whole credit industry. The high level of consumer confusion ensures high profits for providers," said Treasury spokesman Dr Vince Cable.

"The OFT's findings that the APR rate was unavailable or unsatisfactorily explained for 40 per cent of consumers is at best incompetent, but is more likely a cynical attempt to dupe consumers.

"If we are to have genuine competition in this industry, we must make the way store cards and credit cards work genuinely transparent."