Examination of Witnesses (Questions 480-499)
MR JOHN
VARLEY, SIR
FRED GOODWIN,
MR SHANE
FLYNN AND
MR MICHAEL
GEOGHEGAN
26 OCTOBER 2004
Q480 Mr Plaskitt: Thank you for that
refreshing answer. That is exactly what you are doing by the unsolicited
issuing of credit card cheques. You are prodding the customer
to use up their credit line.
Sir Fred Goodwin: We encourage
customers to use our products.
Q481 Mr Plaskitt: Can you be absolutely
confident that this prodding will never happen in the case of
the sort of person the Chairman was just talking about who is
already in some difficulty with their credit situation?
Mr Varley: "Never" is
a word I could not look you in the eye and subscribe to.
Q482 Chairman: The same as politics.
Mr Varley: The point that Sir
Fred makes—and I would absolutely endorse it—is what
are we trying to do here? We are trying to lend responsibly. We
lend to people on the basis that they understand their obligation
and are able to repay. As I said in our own case—I am not
sure whether it is the same with my colleagues—lots and
lots of credit card cheques are used for balance transfers. Balance
transfers enable people to move out of a high interest environment
to a low interest rate environment. That is very helpful to their
monthly budget management.
Q483 Mr Plaskitt: It is but you do not
have to do it by a credit card cheque, do you? There are other
ways of doing it.
Mr Varley: It is an easy way of
doing it.
Q484 Mr Plaskitt: Is it easier than using
the giro slip on the bottom of the monthly payment, which is the
other way of doing it?
Mr Varley: Customers respond to
it.
Q485 Mr Plaskitt: Because you prod them.
Mr Varley: Your question suggests
that the customer does not have a choice. When the credit card
cheque arrives, the customer can do a number of things. The customer
can ring us to say, "Do not send me any more of these."
The customer can put the credit card cheque away. The customer
can rip it up. The customer has choice.
Q486 Mr Plaskitt: You describe them as
part of responsible lending but are you aware of the statement
in the White Paper on reform of consumer credit legislation, paragraph
5.62, where the document lists some examples of what constitutes
irresponsible lending and says that one of them is "unsolicited
issuing of cheques that can be used to draw on credit card accounts."?
Mr Varley: I believe that remark
is aimed at those whom the author would regard as vulnerable.
I do not think it is suggesting that it is irresponsible for us
generally to issue unsolicited cheques.
Q487 Mr Plaskitt: You quibble with that
view then?
Mr Varley: "Quibble"
sounds pejorative. I am suggesting that what we are doing, in
sending unsolicited cheques, is responding to what customers tell
us they want. When the customer receives the cheques, the customer
has choice.
Q488 Mr Plaskitt: Last week, Mr Crosby
was here from HBOS and he said that he would not object to a system
whereby customers had to opt into receiving credit card cheques.
Are any of you prepared to follow HBOS's lead on this?
Sir Fred Goodwin: These products
are of use to our customers. We market them responsibly and agreeing
to no longer promote a product to our customers is not something
I see a reason to do.
Q489 Mr Plaskitt: I am not suggesting
you do not promote it; I am suggesting it is done by an opt in
system which HBOS are prepared to consider but you are not.
Sir Fred Goodwin: I am prepared
to consider anything but I do not want you to think it is something
that we are minded to do at this point.
Q490 Mr Plaskitt: Mr Flynn, will your
bank consider going to an opt in on credit card cheques?
Mr Flynn: We sit here in front
of you. There are four of us here and there were three here last
week. We smile at one another and we shake hands, but we are very,
very aggressive competitors. At the time that Mr or Mrs Smith
may receive a credit card from one of the gentlemen to my right
and others, we want to have the opportunity of extending the utility
of the product that we have given them already. That is why we
use credit card cheques.
Q491 Mr Plaskitt: To prod them.
Mr Flynn: To remind the customer
of the product. In advance of sending out any credit card cheques
we do an extensive review of the customer's account. With better
information, we would be better placed to avoid some of the tragic
situations that have occurred.
Q492 Mr Plaskitt: You have not quite
answered the point about whether you would consider opt in.
Mr Flynn: I would not be agreeing
with Mr Crosby. I would want to compete against him.
Q493 Mr Plaskitt: Mr Varley, will you
go along with HBOS on this or not?
Mr Varley: Of course we accept
your challenge to think about it but I feel that we are not behaving
irresponsibly in sending unsolicited cheques. I think it is part
of an overall marketing approach that we adopt so, like Sir Fred,
I would not want you to think that we are going to change our
policy as a result of it. Of course, you ask me to think about
it and I will.
Q494 Mr Plaskitt: Not for long by the
sound of it.
Mr Varley: That is unfair.
Q495 Mr Plaskitt: You have already said
you are not going to do it.
Mr Varley: No, I have not. You
have challenged me and I will accept the challenge.
Q496 Mr Plaskitt: Mr Geoghegan, will
you go along with HBOS?
Mr Geoghegan: Firstly, nobody
under 21 is offered such a cheque.
Q497 Norman Lamb: By your bank?
Mr Geoghegan: By the whole industry.
Secondly, the BBA itself is reviewing the Banking Code and the
intent is that we are looking to seek to transfer it to 25 years
old. There is movement already in the area you are pointing at.
We certainly will look at it. I am not going to say yes or no.
I think there are competitive forces here. It is good for business
people, for customers and banks if it is used to transfer a balance.
It brings down the cost of credit to a number of people in this
country. I think if you take it away from them you are not giving
them the service that you could give them.
Q498 Mr Plaskitt: I am merely pointing
out it is not the only means of achieving a transfer of a balance.
I think the net is closing on you a bit on this because it looks
like the new banking code to be published next month will ask
all of you to allow customers to opt out of receiving credit card
cheques.
Sir Fred Goodwin: They can opt
out already.
Q499 Mr Plaskitt: Can each of you briefly
describe how you offer customers the chance to opt out of ever
receiving any more credit card cheques from you?
Mr Varley: We sent you in the
appendix to our submission some sample cheques and there are two
statements on this four page document: "If you do not wish
to make use of these cheques, please destroy them by tearing them
in half. If you do not wish to receive any further Barclaycard
cheques, please call customer services." Then we have a statement
under the heading, "Any questions? If you have any other
questions about your cheques or do not wish to receive further
Barclaycard cheques, please call us on . . ." and then there
is a telephone number.
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