UK NEWS

NOOSE ‘IS TIGHTENING AROUND BORROWERS’

CRACKDOWN: Egg

Monday February 4,2008

By Jane Wharton

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THE outrage over a credit card company’s decision to cancel the cards of 160,000 customers led yesterday to calls for an investigation.

Consumer champion Martin Lewis said that Internet bank Egg had “shot itself in the foot.”

But he warned it was a sign of the “noose tightening around the necks of borrowers as the credit crunch bites.”

Lewis said the outcry over the cancelled cards would hurt the firm “substantially.”

Egg is informing seven per cent of its clients that they are an unacceptable risk. But many of those affected insisted they had excellent credit ratings and had been targeted because they had not made the firm any money.

Labour MP Nigel Griffiths called on the Financial Services Authority to investigate and Liberal Democrat Treasury spokesman Vince Cable slammed the Government for being complacent about household debt.

But more credit card companies could follow Egg’s example. It marks a dramatic turn-around from recent years when credit was easily available.

There are fears now for the growing number of people who use credit to fund the costs of day-to-day living.

Affected Egg cardholders will receive letters within the next few days informing them that their cards will stop working in 35 days’ time.

They have been targeted because they had a “higher than acceptable risk profile,” meaning they went over their limit or failed to make the minimum repayments. But many furious customers bombarded Internet sites, saying they paid off their account in full every month. They claimed they were being ditched because they do not pay interest.

The firm denied that claim and yesterday said they stood by their decision. No customer had been contacted by mistake.

Credit reference agency Equifax said banks were increasingly likely to look at whether customers will make them money as well as if they are a risk.