Examination of Witnesses (Questions 80-99)
MR ERIC
DANIELS, MR
JAMES CROSBY
AND MR
FERGUS BROWNLEE
19 OCTOBER 2004
Q80 Mr Plaskitt: I think that would be
a very useful reform if you could do that. Finally, if I could
turn to Mr Brownlee and Capital One's cheques, you send them out
as a little book.
Mr Brownlee: Yes.
Q81 Mr Plaskitt: Why is the first one
made out to the customer for £500?
Mr Brownlee: Because it gives
the option for that customer to pay it in, for example, to pay
off an overdraft, thereby effectively transferring the balance.
Q82 Mr Plaskitt: Why not just send a
book of blank cheques? Why fill one out for them?
Mr Brownlee: Because they need
not use the cheque/they can use the cheque. It is an option for
them to use that cheque.
Q83 Mr Plaskitt: Your customers can understand
very complicated summary boxes, so presumably they can write cheques
fairly easily, can they not?
Mr Brownlee: Yes, they can. We
try to make it even more easy for them.
Q84 Mr Plaskitt: Short of signing it
for them, that is—
Mr Brownlee: We are not allowed
to do that.
Q85 Mr Plaskitt: No, I know. Thank goodness!
Otherwise, I think you probably would. Could I ask finally what
objections you would have to a system whereby customers had to
opt in to having credit card cheques, rather than the opt out
system which you offer at the moment? What is wrong with a system
whereby, when a customer takes out one of your credit cards, when
you issue the card you send a little statement: "Tick the
box if you would like to receive the cheques." You keep pumping
the people, unsolicited, month after month after month after month.
Why not switch to an opt-in system? What is wrong with that?
Mr Daniels: I do not believe I
see the benefit.
Q86 Mr Plaskitt: Benefit to whom?
Mr Daniels: To the customer. We
are trying to offer the customer an additional convenience within
their credit line. This is as you would offer any benefit. The
customer, of course, can decide to take it or not take it. I think
the transparency and the terms and conditions make it very clear
that it is an attractive offer for the customer to get a promotional
rate. Again, it is nothing that is being forced or coerced; this
is something that is simply an additional benefit for the customer.
Why would you want to limit the customer's choice?
Q87 Mr Plaskitt: Well, my system is not.
I am offering the choice to a customer: "Do you want to receive
credit card cheques? Tick box." Then you have a book of cheques.
That is plenty of choice but it is not the unsolicited issuing
of these cheques all the time. I cannot understand why you will
not do that.
Mr Daniels: I cannot understand
why the consumer would benefit from that. I think the consumer
benefits from promotional offers.
Q88 Mr Plaskitt: Mr Crosby, why will
you not move to an opt-in system for credit card cheques?
Mr Crosby: I do not have any objection.
It is certainly something I will look at.
Q89 Mr Plaskitt: You will. Thank you
very much. Mr Brownlee, do you have objections to opt in?
Mr Brownlee: Like Mr Daniels,
I do not see the benefit to the customer. We do not pump in cheques
to people; we are very, very careful, cautious, in terms of who
gets those cheques. We have already identified, to the extent
that we can with the information available to us, that this would
be useful, we think, to them, and we do make it very clear on
the attached data that we send—the little booklet that you
highlighted there—what the opportunities are, the benefits
are, the extended functionality is that we give to those individuals.
I do not see an advantage.
Mr Plaskitt: For the two of you who will
not consider opt-in, I would refer you to the Government's paper
on Reform of the Consumer Credit Market in the 21st Century,
issued by the DTI, where they say that their survey identified
certain lending practices which disproportionately affect people
who are at risk of over-indebtedness and potentially make a bad
situation worse, one of them being the unsolicited issuing of
cheques that can be used to draw on credit card accounts. I think
the two of you who are not at the moment thinking of moving on
this perhaps should think a bit more.
Q90 Chairman: Could I just tidy up on
the summary box before we move on to Nigel and APR. I noticed
a press release on 11 October from APACS, your trade body, which
said, "Thumbs up for summary box: 99.4% of Britons back the
card industry's summary box." I think APACS have consulted
well with their customers there, Mr Brownlee. They said it is
a great thing that summary boxes have come in. Given that, have
you and your organisations considered employing the principle
of the summary box to other major products such as current accounts
and personal loans?
Mr Daniels: Yes, we certainly
are looking into it. As we get the Banking Code coming to the
fore soon, we will look for guidance from there, but we certainly
are considering it.
Mr Crosby: I think it is a likely
development under the Banking Code and it is a good idea.
Mr Brownlee: As you know, we are
credit card specialists, but, as we move into other areas, we
will look at this,
Q91 Chairman: We are looking for a commitment
that you will examine these issues and look at how to provide
consumers with clear information regarding their products. We
have a clear commitment from the three of you on that, to look
at the summary box and other areas?
Mr Daniels: Yes.
Chairman: We do not have it at the moment,
but you will look at that. Good.
Q92 Mr Beard: Last year the Committee
discovered that the annual percentage rate (APR)—commonly
used by consumers to compare credit cards and therefore central
to competitiveness between the credit card companies—could
be calculated in a number of different ways and therefore was
a misleading basis for comparison and for judging competitiveness.
The DTI have now published revised regulations setting out a single
set of assumptions. Do you agree with the main assumptions, given
the new regulations, and will these ensure that all lenders are
now calculating APRs on a consistent basis?
Mr Daniels: We are very supportive
of the single APR. As you know, this time last year there were
two broad rates in the market. We thought the most transparent
was the APACS rate, which was the one that we used, and we are
very happy that it has been adopted.
Mr Crosby: I agree.
Mr Brownlee: Yes.
Q93 Mr Beard: You are all in tune with
the DTI's new code for the APR. Has that guidance from the DTI
and from the Office of Fair Trading been absorbed by the industry,
so that the whole industry is now in tune with what you are saying?
Mr Daniels: I believe that is
the case.
Mr Crosby: It will be effective
from the end of October, in actual practice, for those companies
which were not calculating it that way just now.
Q94 Mr Beard: You are all on course to
implement this single method by 31 October?
Mr Crosby: Yes.
Mr Brownlee: I think there is
potentially one gap in there. I think it is the end of October
in terms of the calculations on the agreements; I suspect, though,
that in terms of advertising it does not become compliant until
the end of May of next year—which is unfortunate.
Q95 Mr Beard: Do you mean you are going
to be calculating according to a basic standard and you are doing
that by the week after next?
Mr Brownlee: Yes.
Q96 Mr Beard: And yet you will not be
using it for the general public until next May?
Mr Brownlee: My understanding—and
I am afraid I do not have detailed knowledge on this—is
that we are prevented from using it until 31 May in terms of advertising.
Q97 Mr Beard: Is that a general assumption?
Mr Daniels: I was unaware of it.
Q98 Chairman: That is not an assumption
we have become aware of.
Mr Crosby: I think there are aspects
of it which the regulations themselves defer until May 2005, as
I understand this.
Q99 Chairman: If you have agreement now
and you are all agreed with it, why can you not start using it
straight away and avoid another six months of confusion?
Mr Brownlee: I am afraid I do
not have detailed knowledge on this. My understanding is that
we are prevented from doing it. If it was at our choice, of course
we would do it—instantly.
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