Examination of Witnesses (Questions 500
- 504)
TUESDAY 30 JANUARY 2001
MISS MELANIE
JOHNSON MP AND
MR WILLIAM
LEA
500. I have not had the opportunity of looking
at this document in detail, but it does seem to me—and I
am just trying to confirm that my impression is right—that
what the Government is proposing is a CAT standard for basic bank
accounts, the possibility or probability perhaps of a CAT standard
for credit card accounts, but the document is silent about the
possibility of CAT standards on normal current accounts as most
consumers now have them. Is that right?
(Miss Johnson) Yes, but, just to make sure you are
absolutely clear, I think the CAT standards on basic bank accounts
and credit cards are on a par in the document, that is to say,
we are seriously proposing that we do a CAT standard in each case.
The detail is obviously something that can be discussed and is
part of the consultation, but we are thinking it would probably
be a good thing to do something in both cases. We are seeking
views on whether there are applications elsewhere, and again,
it would be very interesting to have people's views on that. We
have, for example, canvassed ideas about whether travel insurance
is an area where people would appreciate having a CAT standard.
We think there are other areas where they may be applied. At the
moment the specific proposals in here are for two areas, but we
do think there is scope for further applications.
501. The Government has an open mind and is
willing to listen to representations on extending the CAT standard
concept to the cheque accounts, current accounts and savings accounts
that are now normal?
(Miss Johnson) Yes. We think there is a role for these
things. The evidence on ISAs, for example, has been very good,
that about half of ISA savings are actually in CAT standard products,
and there is a very much higher proportion of people buying CAT
standard ISAs direct than there is of those buying non-CAT standard
direct, which indicates that the consumer feels more empowered
by the CAT standards for ISAs. There is good evidence that they
are effective. We want to see what other areas the public think
they would be effective in. At the moment the two specific proposals
in the paper are on credit cards and basic bank accounts, but
we would be very happy to receive suggestions about other areas,
including the ones that you have mentioned.
Mr Beard
502. On credit cards, Europay International
have argued that, because they are already regulated at European
level, there is no need for them to be regulated at UK level.
How do you respond to that?
(Miss Johnson) The fact is that we are in the UK here,
and the evidence is that there is not sufficient competition on
the credit card side of things, so we do not think there is enough
evidence to suggest that there should not be a UK approach to
this issue. I think all the evidence points in the direction of
us being right on this.
503. Europay again have complained that if the
rules for membership of the transmission system for credit cards
were widened to new members, there could be a systemic risk if
new members were unable to meet their obligations. Do you agree
with that? What can be done to safeguard against it?
(Miss Johnson) Issues of systemic risk are really
matters for the Financial Services Authority and the Bank of England.
I do not think there is a problem there, but it is up to the FSA
in particular to make sure that prudentially firms in the financial
sector are viable and other parts of the financial services sector
are viable, and not likely to cause systemic risk of some kind.
We think this is a good proposal. It will drive competition. It
may be that those who do not wish to go along with that have their
own reasons for not doing so.
504. So you reject that point.
(Miss Johnson) I do indeed.
Chairman: Thank you very much.
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