Supplementary memorandum submitted by
MBNA
In response to the Treasury Select Committee
hearing last month and my subsequent letter, as promised, here
is follow- up information in relation to a number of specific
points.
1. Scenarios
As you know, we have undertaken a great deal
of work to date on scenarios, both unilaterally and as part of
an APACS working group. The overwhelming conclusion of the group
was that "cost payment" scenarios don't work. However,
we are looking again at scenarios, specifically "time to
pay" scenarios similar to those discussed in our meeting
last month.
2. Credit card cheque Customer opt-in
As you requested, we are looking again at the
Customer value of "opt-ins" for credit card cheques.
3. Debt Counselling services
Your colleague, Mr Cousins, asked us to provide
you with a figure for our donations to debt advice and counselling
services and to give that as a percentage of our turnover. We
are happy to give you a figure for the donation, which is outlined
below, but will provide this as a percentage of what we would
call Net Income Before Tax (NIBT) or, as others would call it,
Pre-Tax Profit. This is a recognised measure of corporate giving
and is the benchmark used by Business in the Community's PerCentStandard.
For 2004, our donation to debt advice agencies
and the provision of financial education will be in the region
of £900,000. This is just under 0.4% of our NIBT of £259
million (2003).
For 2005, we are increasing our direct donation
to Money Advice Trust and other debt advice agencies by an extra
£100,000. Also, I would also say that as an organisation,
over and above the donations made to debt advice services, this
year we will give a further £1.1 million to local charities,
schools, individuals and other voluntary organisations.
4. Default charges
As I understand your question, you would like
to know what costs are incurred by us if a customer is late in
making his minimum payment, but does subsequently pay it in full
five days late.
In a case such as this, a standard letter is
usually sent out on day five. In some cases, the letter may be
sent earlier and there may be some contact over the telephone
with the customer. It would not be right, however, to think that
we only incur the superficial costs of a letter or a telephone
call in these circumstances.
We have in place an entire infrastructure to
deal with late payments across our portfolio. The costs of the
team employed, their place of work and the systems used all need
to be covered.
Further, whenever a payment is late, we cannot
say with any certainty what will result in any given case. Payment
might come in within five days, or it might come in later still
after a great deal of effort on our part, or it might not come
in at all after more effort has proved to be wasted.
We cannot as a commercial organisation adopt
a "wait and see" approach in each case, calculating
charges only when the payment arrives, if it ever does. Any such
approach would also be undesirable for our customers, who would
not know in advance the charges they would have to meet.
What we do therefore is to look at the total
costs and losses resulting from late payment, and set a uniform
charge across the portfolio. As you are aware, we have provided
the OFT with confidential and commercially sensitive details as
to the calculation of this charge, and we are currently in discussion
with them as to it.
If you have any further questions on these or
any other topics please do not hesitate to contact me. I will
keep you informed of progress.
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