Select Committee on Treasury Appendices to the Minutes of Evidence


Further memorandum submitted by Lloyds TSB


  Peter Ellwood agreed to expand upon his answer to the Treasury Select Committee on 14 May 2002 in respect of the Lloyds TSB Asset Advance card. Accordingly, I am responding on his behalf.

  In paragraph 238 of the Select Committee report Mr Plaskitt referred to work done by the Consumers' Association (CA) in November last year which highlighted discrepancies in the amounts of interest charged by HSBC, Barclays, Royal Bank of Scotland and Lloyds TSB credit cards, all with an APR of 18.9 per cent.

  The research correctly illustrated that Lloyds TSB's and its competitors' credit cards, with an interest free period of up to 56 days and an APR of (at that time) 18.9 per cent., incurred an interest charge of £5.79.

  However, Mr Plaskitt made a number of negative remarks about the Lloyds TSB Asset Advance card, noting that, in the CA's research, this incurred an interest charge of £7.48. I should point out that this product is designed specifically for (and marketed to) customers who borrow money on their credit cards for longer periods. The Asset Advance Card therefore offers a much reduced rate of interest of 11.9 per cent APR, but purchases incur interest from the day on which they are made. The Asset Advance Card should not, therefore, be compared with other standard credit cards. Whilst the Asset Advance Card is more expensive for purchases over a short period of time, it is clearly cheaper for customers who do not pay off their credit card balance for a number of months and, indeed, it can be considered as an alternative to commercially available short term unsecured loans, for which similar rates apply.

  I should be grateful if you would reflect this information in the Committee's final report. Please let me know if there is anything more which you would like us to clarify.

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16 July 2002

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