Examination of Witnesses (Questions 540-551)
MR JOHN
VARLEY, SIR
FRED GOODWIN,
MR SHANE
FLYNN AND
MR MICHAEL
GEOGHEGAN
26 OCTOBER 2004
Q540 Norman Lamb: Do the others of you
have a similar principle about not trying to increase the limits
of people who are in full time education?
Mr Varley: Our approach would
be that we want to see a pattern of card usage before we increase
the limit. If somebody is running the card, borrowing on it, operating
that borrowing and repayment successfully, we would consider maybe
once or twice a year whether there should be a limit increase.
If there is a pattern of minimum payments, for example, if it
is clear that the card holder is struggling with the borrowing,
we certainly would not increase the limit.
Sir Fred Goodwin: We would have
a maximum of two increases a year, but it is based on an assessment
of the person's creditworthiness.
Q541 Norman Lamb: There is quite a lot
of concern about lending to young people, the huge pressures that
they are under and the tragic cases that have come out and so
forth. Do you feel as a group that there is some way to go, that
you could do more to try and improve the standards of responsible
lending, particularly to that rather vulnerable group where the
pressures are so great to spend and spend?
Sir Fred Goodwin: The bulk of
credit that goes to students does not come from us. It comes from
the government.
Q542 Norman Lamb: You want a bit more
sharing of information?
Mr Varley: The information would
be helpful.
Q543 Norman Lamb: The debt that is building
up on the student loan?
Mr Varley: Yes.
Q544 Chairman: We asked this question
last week as well. In the US consumers are allowed to request
a copy of their credit report once a year free of charge. Do any
of you see any merit in introducing a similar measure in the United
Kingdom, allowing customers to check their credit report for errors
and provide them with details of their total debts?
Mr Flynn: It is my understanding
that in the US it is for those people who have been declined,
the free one, but I would support that.
Q545 Chairman: It is the Federal Trade
Commission which has issued its final rule regarding free annual
credit reports under the Fair and Accurate Credit Transactions
Act.
Mr Flynn: I would support it in
general.
Sir Fred Goodwin: As you know,
customers can have access to their record but it is not from us.
It is from the reference agencies.
Q546 Chairman: Do you think it is a good
practice to introduce here?
Sir Fred Goodwin: The practice
is here.
Q547 Chairman: It is not free. It is
£2. That is the difference.
Mr Varley: I have nothing to add
to what Sir Fred said.
Q548 Chairman: What did Sir Fred say?
Mr Varley: What he said—I
have perfect recall of it—was that customers can get access
to the history held by the credit reference agencies.
Q549 Chairman: For £2. It is not
free. Do you think we should have it free here?
Mr Varley: If I was going to answer
the question accurately, I would want to know—and I do not
know, I am afraid—how many customers apply for it. If there
is a huge volume of demand for it, I can see there may be an advantage
in having it free. If it is rather a specialist subject for a
small number of customers, the cost of provision will be quite
high.
Mr Geoghegan: I share the same
view as Mr Varley.
Q550 Chairman: I spent quite a part of
my life in Northern Ireland and some colleagues are still over
there. They mentioned to me about the situation in Northern Ireland
about the big banks, the four main players, yours, Ulster Bank,
which you own, the Bank of Ireland, First Trust Northern Bank.
I believe yours is the largest in terms of current account business
in Ulster Bank. Ulster Bank charges an account maintenance fee
of £8 a quarter, as does Bank of Ireland and First Trust
Northern Bank is £7.50. It was pointed out to me this is
rather strange concerning Ulster Bank because no other member
of the Royal Bank of Scotland Group charges a quarterly overdraft
fee and, even though the vast majority of banks will charge interest
when you become overdrawn, almost all banks of England, Scotland
and Wales have long abandoned fees and charges on authorised overdrafts.
Are my friends in Northern Ireland getting a pretty bad deal and
can they get a better deal?
Sir Fred Goodwin: You have perhaps
half answered your own question in the sense that these fees are
obviously visible to people in that market place. That is the
most important point. I am not here today equipped to answer detailed
questions about Ulster Bank but Ulster Bank is thriving in Northern
Ireland and in the Republic of Ireland. In my experience, businesses
only thrive when they offer opportunities to customers that are
attractive and competitive. You have highlighted that it is a
highly competitive market place. There are other parts of the
Royal Bank of Scotland Group where fees are charged that are not
charged here—for example, in the United States and in Europe.
All it serves to highlight is that in different markets there
are different charging structures. The most important principle
and the one that has lain at the heart of the discussions we have
here, one that we fully subscribe to, is around transparency.
In a free market, the important point is that customers are given
transparency of information which enables them to make choices.
I would start from a position of believing that to be the case
in Northern Ireland. I am happy to look at it and come back to
you.
Q551 Chairman: There is a difference
between the United States and Northern Ireland. I do not want
to offend my different friends in the many different political
spectrums in Northern Ireland. Also, on transaction charges, there
are charges when you write a cheque, for a direct debit payment
or draw money from an ATM. If you bank with Ulster Bank, the breakdown
of these charges is as follows: manual debit, 58p; automatic debit,
43p; switch debit, 44p; cheques and standing orders, 58p. Again,
neither Nat West nor RBS charge their customers for making the
above sorts of transactions. It seems a bit of a raw deal.
Sir Fred Goodwin: I am not armed
with the information. I will get the chief executive of Ulster
Bank to draw up a response to that. [3]
Chairman: Thank you. Can I thank all
of you for your attendance this morning? It has been extremely
helpful for us because we have a common agenda here and we wish
to see that pursued to its satisfactory conclusion. We hope as
a Committee to issue a short report on this and to continue this
discussion with yourselves but on the issues this morning we have
agreed that we are all moving forward on a summary box and monthly
statements. All of you are thinking of possibly looking further
at using the style used by Barclaycard for minimum repayment scenarios.
On interest calculation methods, we all agree that the present
system is far from ideal. There is still quite a lot of work to
do on that. I believe all of you are looking to supplying written
information to the Committee on the types of cost which fall on
banks giving rise to penalty charges. On data sharing, progress
has been made with the APACS agreement but again there is much
more to be done there. I believe that you will look at issuing
credit card cheques on an opt in basis only (but with no expectation
of movement). However, we will leave you to look at that. I think
it has been very constructive for all of us on the Committee and
hopefully for yourselves. You know that we are going to be conducting
a financial inclusion inquiry and we just have a few tail end
questions on that. I would like you to take back our thanks to
APACS, in particular, to Sandra Quinn and others, because we have
become constant friends over the past 18 months or so and they
have progressed things a lot for us on that. Mr Flynn, you can
give my regards to Charles Krulak. He came and entertained us
with his hearts and minds scenarios. He sent us a nice letter
as he departed for the United States. Mr Varley, you can give
your thanks as well to your predecessor. We have a fond and deep
appreciation of him. We look forward to continuing our relationship
with you. Thank you very much for your attendance this morning.
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