Banks are still being questioned by the Treasury Select Committee over the varying methods they use to calculate annual percentage rates (APRs) for credit cards.
Chairman of the Treasury Select committee, John McFall yesterday said while progress has been made, there is still some way to go as the credit card charges imposed on consumers are thought to generate millions in profit for the companies.
The TSC quizzed top officials from leading banks including: Barclays, Royal Bank of Scotland, HSBC and MBNA Europe, over what efforts being made in industry to make these varying rates more transparent to consumers.
All four banks are satisfied efforts to provide information through summary boxes are sufficient, and when the committee called for an industry standard in methodology, the industry members stressed that such a move will stifle competition between them.
Barclay’s chief executive, John Varley says: “It denies richness and variety and competition is a good thing for consumers.”
He argues empirical evidence gained on his consumers suggest that they do understand.
Nigel Beard MP challenged anyone to do better citing Varley’s information and evidence as unconvincing.
McFall says: “If it is hidden and consumers don’t know about charges then it can’t be considered competition.”
He then asked if there wasn’t a way to present these charges so as to let customers understand it.
RSB head, Sir Fred Goodwin reiterated while a summary box is the way forward: “It needs to come from everyone in industry.”
Varley, however is adamant the reason banks signed new customers all the time is that customers do understand.
Goodwin added that customers who understand the interest rates ask for the card while those who don’t understand wont.
McFall asked for ‘movement on the subject.’
He says: "Yes or no, is it fair for two different people to be charged on the same card on the same day with the same APR, yet at a different rate?”
Other participants Michael Geoghegan, CEO of HSBC, and Shane Flynn, chairman of MBNA Europe along with Varley and Goodwin were made to agree with McFall.
On the discussion of data sharing, all members agree that the more data sharing the better.
John Mann from the committee said while there is a distinct varying element of tone on data sharing, the committee were in agreement that data sharing has shown good progress.
Mann did however call for some kind of ‘independent debt counselling’ facility to handle cases where people had gotten themselves into exceeding debt.
At present all banks provide a number to call when clients are faced with incurred debt.
On the case of credit card cheques, the committee challenged whether the four banks would allow people to request credit card cheques instead of ‘pumping’ into them?
Unlike HBOS, at last weeks meeting, none of the banks agreed to the ‘opt in’ sharing the same opinion they all market to customers in a responsible manner.
McFall concluded there is no expectation for movement on the subject.
All four banks struggled to argue what impact ‘penalty charges’ procedures incurred by them, so promised Lib Democrat MP Norman Lamb they will provide written submissions as to the costs of administration charges incurred by the banks for late payers.
As was the case last week, McFall called the banks' non-disclosure of the money they make in charges a a PR disaster and said people will always be suspicious as to whether banks make a profit or not.
The committee concluded the meeting by praising the banks for steps taken to improve the level of information available to consumers.
Yesterday's meeting comes a week after top executives from Lloyds TSB, HBOS and Capital One appeared before the same committee.
In December 2003, the committee outlined plans to make credit card charges fairer, citing a lack of transparency on charges allowed some credit and store card providers to charge increased interest.IFAonline
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