Examination of Witnesses (Questions 808
WEDNESDAY 10 MAY 2000
808. Mr Potts, Ms Walton and Ms Allerton, welcome.
It is good of you to come and spend time with us. It was good
of you to put a paper into us in advance of the meeting, which
was very interesting. We particularly moved in this direction
after having evidence, some months ago now, from a representative
from Freeserve, who said to us then, they had been endeavouring
to ensure that their customers were aware of their rights in the
event of them having difficulties using their credit cards for
transactions on the net. They had come under some pressure from
some of the card holders to be somewhat more reticent about what
they were saying about rightsthis is for the public record,
it is there and it will be appearing in our Reportand this
led us to start showing more interest in the topic. It was good
of to you to follow through with your papers to us. Some of us
have also had the opportunity of going to Washington and meeting
a range of people there. We were also supplied with some very
interesting materials from Visa about the extent to which they
market themselves in a very open fashion, claiming to offer zero
liability in the States for all transactions across the whole
of the USA for anyone using their cards. The PR emphasis they
were using seemed to have a stronger degree of openness there
and encouragement than, perhaps, we have seen in the United Kingdom.
I was wondering whether we could spend a little time, initially,
on this and ask you what in theory or in practice are the exceptions
to consumer protection. In other words, what is in the small print
in the United Kingdom? You have given us an outline of what you
do offer. Would a consumer be protected in the following situations,
which are examples of particular consumer concerns, a consumer
using his or her card to purchase from a vetted store only to
find transactions relating to other companies appearing on the
statement; a consumer using a card to purchase from an unvetted
or dubious site, say involving pornography or drug products and
an unauthorised or incorrect transaction would appear; thirdly,
a consumer using a card to purchase from a site which then totally
disappears and no trace can be found yet they have had a transaction.
Would you like to comment on my opening remarks and then come
around to the particular specifics I put to you.
(Mr Potts) Thank you very much, indeed, for inviting
us. We have a certain amount of interest in this subject because
we have enormous customer-base, both individual consumers but
also retailers. Something like 6.5 million consumers in the United
Kingdom. We also have a growing number of consumers across mainland
Europe, Germany, France and Spain. We have invested very strongly
in businesses there. We have something like 100,000 retail customers
in the United Kingdom and we see e-commerce as an enormous opportunity
for credit cards, because it extends the reach of our customers,
for purchasers, if they are card holders or sales if they are
retailers. It is in our interest to make sure that we make life
easy for those customers, whether they are buyers or sellers across
the Internet. We have a certain amount of self-interest in improving
the situation for those customers. You made a number points, perhaps
I can comment on the Freeserve point. Certainly our practice is
completely the opposite of what you have suggested there. We have
gone out of our way to introduce dispute resolution systems in
our business, which are very much consumer friendly. In particular
for the Internet last year we launched a charter which effectively
underwrites all of our customers if they encounter any fraud across
the Internet. There is no limit to that amount, there is no minimum,
and so on. The reference to Visa in the States is interesting.
I am pleased to see that they are following the example of Barclaycard,
because we are already doing that. Legally we are entitled to,
if we want to, charge a customer £50 in the event of a fraud.
We have never done that in the history of Barclaycard. The most
we ever stipulated was £25, and that was many years ago.
We very rarely imposed that, we even stopped that £25 some
years back. Not only do we have a completely underwritten approach
to our customers cross the Internet for fraud but we advertise
it strongly. I do not suppose you get time to watch much television
but if you do during April and May you may see Angus Deaton telling
the world that Barclaycard is looking after its customers across
the Internet, and not to worry. It is absolutely in our interests
because we want people to use the Internet. In terms of the specific
questions you ask, there is no small print. There are, of course,
terms and conditions, which there are with any consumer credit
arrangement, and those are voluminous. In terms of small print,
the only areas I ought to draw to your attention to are two extreme
situations where we would exercise some degree of caution in dealing
with a claim from a customer, one would be where there was clear
evidence of collusion in a fraud. Of course, first party fraud
is there and we do get claims from customers who have received
the goods and services but claim that they have not. It is difficult
to prove, as you might imagine. In some cases we do see that and
we would resist that. The other example is in circumstances of
gross negligence. In practice there are very few situations like
that in ordinary purchases that we would be able to make a stake.
Those situations normally occur in the case of transactions of
cash, withdrawing cash from a cash point machine, wheremaybe
you would not believe this but many customers write their pin
number down on their card and if they have that card stolen it
is open access to their funds. In terms of ordinary transactions,
ie non-cash transactions, there are very, very few situations
in which we would able to identify gross negligence and make it
stick legally. In practice there is no small print. The specific
three items that you raised with us, in all of those circumstances
we would regard ourselves as responsible for reimbursing the customer.
809. That is very comforting, indeed. You did
write to us with your paper, which was very helpful, on the basis
of it being submitted as private and confidential. In the light
of what you said we are wondering whether that tack still stands?
(Mr Potts) It may be that our legal experts are inclined
to stamp everything that goes out of our office "private
810. I think this is the problem that may exist,
that may lead to the misconception of the type I just described
that I hold.
(Mr Potts) I do not think there is anything in our
submission to you we would not want you to tell the world.
811. I think it is brilliant. I have to say,
before I ask my questions, that has been my experience. Before
you started giving your evidence I said to Viscount Brookeborough
I have been using cards for thirty or forty years and I have never
once experienced fraud. I think this is all a great myth, really.
I have always felt that you did underwrite it. I did have one
problem once in SingaporeI was able to prove I was not
in Singaporeand when that happened just by virtue of sending
photocopies of my passport stamps. Leaving that to one side, in
your experienceyou obviously keep a track on fraudis
the opportunity for fraud using your Barclaycard greater on the
Net than it is just going into a restaurant here on the South
(Mr Potts) No.
812. That is interesting.
(Mr Potts) In practice the biggest concern we have
currently about fraud is counterfeit fraud. This is in the physical
world, making cards. The magnetic strip on the back of the card
is vulnerable to copying and you can buy a machine in the States
813. If you are stuck at home dealing with Amazon.com
and you use your card there would be much less likely to be a
fraud than if you were in some small shop.
(Mr Potts) You are much more likely in a restaurant
if there is a dubious waiter or waitress that takes down the details
of your card.
814. You did say you have these advertisements
on television saying that you really do underwrite this. Do you
not think it would be a good idea to try to increase the awareness
of this and in the interests of increasing your business. Many
people are saying they do not want to use the Net, because of
the probability of fraudI have heard grown men and woman
giving that ad nauseam as their big reason for not using
(Mr Potts) That is precisely why we are doing the
advertising and taking such a high profile. We have a very valuable
brand in Barclaycard. Our research showed that if Barclaycard
put its name behind a guarantee it would double the number of
our customers who would use the Internet.
815. Why do you not do this?
(Mr Potts) That is what we have done. That was behind
the strategy of launching our on-line charter. That is why we
are going high profile with the advertising. We will be creating
more of this.
816. For those of us who do not have the timebecause
we are stuck hereto watch television, it would not be a
bad idea to put a sticker on a normal Barclaycard statement each
month to the effect that you underwrite fraud because that would
encourage your customers to use your card on the Internet. This
is a marketing point that I believe would be a great accelerator.
(Mr Potts) That is absolutely right, you could not
be closer to the truth. You could not be closer to our strategy.
817. I am available for a job, by the way!
(Mr Potts) Our Marketing Director's job is at risk.
818. Can I follow by saying, I am a director
of a small mail order company with a PDQ machine. One of the things
you do not make clear in any of your advertising, certainly that
I have seen, is that you vet the companies you deal with extremely
carefully. This would be another assurance to your companies.
(Mr Potts) I hope it was not over-vigorous in our
819. We still got it. We had no problems nor
had you. You now have competition because there are credit cards
that are developed especially for the Net. What do they offer
or what do they purport to offer that you feel you do not?
(Mr Potts) From our point of view we will also be
developing cards which are specifically for the Internet. It depends
where you start from, most of the companies that are offering
Internet-only cards start without an existing card business and
they want to get into e-commerce. For them the easiest strategy
is to develop an Internet-only card. Our priority is to e-enable
our existing business and e-enable our customers. We start with
6.5 million personal customers in the United Kingdom with cards
plus 100,000 retailers. Our priority is to help those customers
buy on the Net or sell on the Net. You mentioned PDQ, we invented
new versions of that specifically for the Internet. It seems to
us that by concentrating on that initially we will meet the needs
of an enormous existing customer base. What we are doing quite
separately is working onyou will hear some of this in the
summerspecific products which apply to the Internet as