Letter to the Committee submitted by Chief
Executive of Egg
I am responding on behalf of Egg to your letter
dated 19 July addressed to the Chief Executives of the largest
credit card issuers requesting further information on a number
of the recommendations in your committee's report, "The
Transparency of Credit Card Charges."
As you are aware, Egg has engaged constructively
with your committee's inquiry in the interests of raising the
standards of the UK's credit card industry, by challenging existing
toxic practices and helping consumers improve their relationship
with their money. Furthermore, we are playing an active role as
part of APACS in the industry's development of the Summary Box
and minimum payments warning. However, we continue to pursue our
own initiatives where we feel these are in the interests of the
consumer.
Addressing the contents of your letter in detail:
Our Summary Box does meet the objective of making
information available to the consumer in a clear and comparable
manner and does not include any dense print. As an internet bank
our Summary Box is available on our website, which was recently
commended for its accessibility in joint research by the Disability
Rights Commission and City University.
As you are aware the industry is currently reviewing
the requirements for the Summary Box in view of the introduction
of the new Advertising Regulations under the Consumer Credit Act
which come into force on 31 October. We are participating actively
in these discussions and will be issuing an amended Summary Box
from 31 October which will be compliant with the new regulations.
Egg is one of several card issuers who have developed
illustrative scenarios, demonstrating the cost of only making
minimum payments and a fixed monthly amount, as recommended by
the Committee's report. These illustrative examples are shown
on our website together with our Summary Boxes.
Egg already includes a link to the Summary Box
on the statement notification e-mails which our credit card customers
receive to take them to their monthly statement.
(d) Interest calculation methods
Egg has long campaigned for the introduction
of a standardised method of calculating interest charges. In March
this year, we published "Good Rate Hunting",
which supported the Committee's call for standardisation, with
research demonstrating that consumers are largely unaware of the
different methods of calculation and are unable to compare products
accurately on given the information. (A copy of this report
was sent to you for information.)
We were disappointed in the lack of support for
this measure from the DTI and from the industry, evident in their
supplementary response to the Committee's report and in the media
coverage respectively.
We do not believe that it is a competitive issue,
as our research shows consumers do not understand the different
methods used and do not take them into account when selecting
a credit card. However, we do not believe there will be much progress
on this issue as there seems to be little enthusiasm from the
industry or the Government for such a move.
(e) Transaction/penalty fees
Egg's default charges are a genuine pre-estimate
of the costs to our business of customers missing their payments.
We are currently producing a detailed breakdown of payment collection
costs for the OFT and are unable to place this in the public domain
while the correspondence with the OFT is ongoing.
(f) Restrictions on unsolicited increases
in credit limits
Egg fully supports the APACS voluntary guidelines
on the unsolicited raising of credit limits, which are due to
be incorporated into the new Banking Code. In addition, Egg does
voluntarily restrict the number of unsolicited credit limit increases
that a customer may receive and is thus supportive of the TSC
position. Furthermore, all Egg customers can reduce their own
limit through our website or by telephone.
Egg does not issue credit card cheques and has
no plans to do so.
(h) Payment Protection Insurance
Egg is a member of the GISC and our sales of
card repayment protection insurance follow their guidelines to
ensure suitability. From 14 January 2005 insurance sales will
be regulated by the FSA and we have applied to be authorised by
the FSA to sell insurance.
Furthermore, we ensure card repayment protection
insurance is not sold to those who would not benefit from it by
making customers aware at the point of sale that their existing
medical conditions will not be included and asking them to check
the terms and conditions, which list all exclusions clearly and
in simple language. A copy of our terms and conditions can be
supplied to the committee on request.
We are unable to disclose information on claims
as this information is commercially sensitive. However, our half
yearly interim results in July 2004 show that we received £23.3
million of income from sales of card repayment protection insurance,
for the previous six months period.
CREDIT DATA
SHARING
Egg currently shares both positive and negative
data with all three credit bureaux. We support full data sharing
across the industry and believe it is in the interests of responsible
lending for all lenders to share all information on all their
customers' borrowing facilities.
In addition to the existing legislative barriers
that you acknowledge, we believe one of the existing barriers
to further progress in this area is the reluctance of some banks
to share current account data, which would assist all lenders
in making more informed lending decisions. We would urge the Committee
to encourage all banks to share both positive and negative data
on all products.
I hope that this response will prove of use
to the Committee's continuing enquiries. If I can provide any
further information on or be of any assistance, please get in
touch.
24 September 2004
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