Examination of Witnesses (Questions 60-79)
MR ERIC
DANIELS, MR
JAMES CROSBY
AND MR
FERGUS BROWNLEE
19 OCTOBER 2004
Q60 Mr Plaskitt: Mr Crosby?
Mr Crosby: We believe that they
extend the range of options under which customers can effectively
use their credit card.
Q61 Mr Plaskitt: Mr Brownlee?
Mr Brownlee: I cannot add more
than my two colleagues have already added. That was very clear.
Q62 Mr Plaskitt: Could we look at the
cheques that you actually issue. If I may turn to Mr Daniels first
at Lloyds Bank, why does your promotional literature for credit
card cheques not advertise a "go-to" rate? It is big
on the introductory rate but it does not mention the "go-to"
rate at all. Why is that?
Mr Daniels: I would make two points.
The first is that the literature makes it very clear that the
"go-to" rate after the introductory period is the normal
rate for the card. That is very clear. We recognise, however,
that it could be clearer and we will move toward putting in an
explicit "go-to" rate as well.
Q63 Mr Plaskitt: You will?
Mr Daniels: Yes, we will.
Q64 Mr Plaskitt: When do you expect to
do that?
Mr Daniels: I believe that is
in January.
Q65 Mr Plaskitt: Why on the cheques is
there a cheque expiry date? These were issued fairly recently
and it says the cheques expire on 19 November 2004. What is the
purpose behind that?
Mr Daniels: There are two purposes.
One is to prevent fraud: having open-dated instruments can lead
to fraud. In addition to that, customer circumstances can change.
As I suggested, this is part of the overall credit limit, so if
a customer between the time that we mailed and the expiry date
were to run up an enormous amount of debt, this would add to the
debt, so we are trying to be prudent and keep it within the credit
limits.
Q66 Mr Plaskitt: Nothing to do with the
expiry of the introductory rate offer, then?
Mr Daniels: That is correct.
Q67 Mr Plaskitt: Really? To read it,
it gives the clear impression that you had better use the cheque
before 19 November otherwise the introductory offer is not available
any more.
Mr Daniels: Yes. I believe that
is correct. I do not see the conflict, sir.
Q68 Mr Plaskitt: When you told me it
was about convenience, it is not about convenience, really; it
is about prompting someone to use up a bit more of their credit
limit before a cut-off date, is it not?
Mr Daniels: We are making an offer
to a customer. The customer of course can take the offer or not
take the offer, but we are making a limited-time offer that we
believe is prudent and conforms with good credit practice.
Q69 Mr Plaskitt: They could just go and
use their credit card, though, could they not?
Mr Daniels: They could.
Q70 Mr Plaskitt: Why issue unsolicited
cheques when your customers could simply use their credit card?
Mr Daniels: Because they may use
the cheques for other purposes; for example, paying off other
balances. This is an attractive way for a customer to lower their
monthly payment.
Q71 Mr Plaskitt: So you would say that
part of the justification for the cheques is they are a good means
to pay off or transfer balances?
Mr Daniels: Exactly.
Q72 Mr Plaskitt: And they have that particular
function?
Mr Daniels: That is a legitimate
part of it.
Q73 Mr Plaskitt: In which case, when
you issue that leaflet, which you will recognise: Credit card
cheques: a smarter way to use your credit card, there are
four illustrations on the glossy leaflet as to how you might use
it and you write: "Cavort around on a beach; paint a room;
buy the latest electronic music machine; or go on a shopping spree."
Which of those things can you not do with a credit card?
Mr Daniels: I believe you can
do all of them with a credit card but sometimes it is more convenient
to have a cheque: to pay for a builder, for example, in the second
case.
Chairman: Bob the Builder.
Mr Fallon: They do not take cheques.
Q74 Mr Plaskitt: But the cost of doing
it, if your customer decides to use the cheque instead of the
credit card to purchase these things? Is there any impact on the
cost to them over an extended period of credit?
Mr Daniels: I beg your pardon?
Q75 Mr Plaskitt: As opposed to using
the credit card?
Mr Daniels: This rate is more
attractive than the credit card rate. It is an introductory rate
or a promotional rate, if you will.
Q76 Mr Plaskitt: Yes, but once they have
got past the promotional time, if they are still varying the debt—
Mr Daniels: Then it reverts to
the normal rate of the card.
Q77 Mr Plaskitt: I want to turn to Mr
Crosby and look at HBOS cheques for a moment. These are the cheques
which you issue through Halifax. Why do you have printed on the
stubs, next to the cheque, "Reasons for using it: holidays,
gifts and treats"? You found room to put that on but you
apparently found no room on the cheques to put anything about
the APR. Why is that?
Mr Crosby: I think the cheques
are issued on the same side as the document that discloses the
APR, but I would be quite happy to put the APR on the stub.
Q78 Mr Plaskitt: Would you?
Mr Crosby: Yes, very happy.
Q79 Mr Plaskitt: I think that would be
a very useful—
Mr Crosby: I have no problem with
that.
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