Supplementary memorandum submitted by
Lloyds TSB
When Mr Daniels gave evidence to your Committee
on 19 October, he promised to provide further information in respect
of the "Egg, Good Rate Hunting, Report" and treatment
of our customers in financial difficulty. I am now pleased to
be able to provide that information to the Committee on his behalf.
Firstly, you asked Mr Daniels to write to you on
assertions made in the Egg Report, published in February 2004
and I am grateful for this opportunity to clarify matters.
The report compares the Egg Card (APR 13.9%) with
the Lloyds TSB Advance Card (APR 11.9%) with the aim of demonstrating
that cards advertising lower APRs can actually charge more interest.
However, unlike the majority of credit cards, the Lloyds TSB Advance
Card has no interest free period, which largely accounts for the
difference in the interest charge. The Advance Card is designed
for and marketed to customers who do not pay off their balance
in full each month and use their card for longer-term borrowing.
There is no interest free period and customers who do not pay
off their balance in full thus benefit from a reduced APR and
lower interest charge. This is clearly explained in the Advance
Card Summary Box, however, this distinction is not made clear
in the Report.
The Committee also discussed Lloyds TSB's wider support
for customers in financial difficulty and Mr Daniels undertook
to provide the Committee with details of our Customer Support
Unit. Customers in financial difficulty are able to contact our
Customer Support Unit directly, or they might be referred via
a branch. The aim of the Unit is to identify and provide assistance
to those customers who might be encountering financial difficulties
at an early stage.
The majority of referrals to the Unit come from branches
or customers directly and approximately 100,000 customers are
currently referred to the unit per year in this way—around
0.6% of our customers. Our advisers are trained to take customers
through their income and expenditure and offer advice or debt
rescheduling with the aim of reducing their monthly commitments.
60% of customers referred to the Unit have their debts successfully
rescheduled so that they are able to manage their repayments adequately.
Customers whose financial difficulties are particularly severe
and require debt rescheduling with a number of different providers,
can be referred to Pay Plan, an independent financial consultant
that will look at a customer's financial commitments in their
entirety and liaise with other lenders as appropriate.
We also proactively identify loan and overdraft customers
who are showing early signs of financial difficulty, and contact
them by telephone directly to offer the Unit's services. However,
only 20% of the customers we contact in this way respond positively.
Customers will have any credit card borrowing considered as part
of a review and we are looking to extend this service to credit
card only customers at the earliest opportunity. From early this
year, we will also be writing to customers who are showing initial
signs of financial difficulty, giving them the number for the
Customer Support Unit and inviting them to get in touch. I hope
that this information is useful to the Committee and I would be
happy to arrange for a more detailed briefing to be given if this
was appreciated.
Finally, I would like to clarify a point Mr Daniels
made when answering a question from Mr Plaskitt on credit card
cheques. Mr Plaskitt asked why there was no "go-to"
rate on credit card cheque literature and Mr Daniels explained
in part of his answer that ". . . we recognise that it could
be clearer and we will move toward putting in an explicit `go-to'
rate . . .". I believe Mr Daniels also added that we expected
to do that in January. However, due to some system constraints
we will not be able to make that change in January, but do expect
to be able to do so from February.
I hope that this information is useful to the Committee
and if I can provide anything further, I would be happy to do
so.
5 January 2005
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