Confusion over the reasons behind Egg's cancellation of thousands of credit cards has led to speculation over the possibility of more banks following suit.
Egg, which is owned by the US bank Citigroup, wrote to 160,000 customers last week to tell them their credit cards would be withdrawn and they had just over a month to stop using the cards, while allowing them to continue with monthly payments to clear balances.
Citigroup said that it had taken the decision after an extensive credit review and had targeted customers with a higher than acceptable risk profile. However, a number of those customers have complained that they had not exceeded their credit limit or missed payments. Some are concerned that their ability to apply for credit in the future will be harmed.
Analysts believe the move, which comes a year after Lloyds TSB said it would impose a £35 annual charge on account holders who do not use their cards, may prompt other banks to scrutinise their credit card books.
"You may see other banks looking at the profitability of the card businesses in a different way," said Doug Taylor, spokesman at Which?, the consumer group.
Egg yesterday defended its actions, claiming only the accounts of customers with poor credit records were closed. "Only those whose credit scores deteriorated in the months before Egg was acquired by Citigroup last May were affected," said Rachel Roe, an Egg spokeswoman.
Experian, the credit checking company, said the cancellation would not damage customer credit ratings. Any account stopped will be recorded on credit reports as "settled", the same record that would be carried if the customer cancelled the account themselves.
Steve Willey, head of credit cards at moneysupermarket.com, said that Egg had caused confusion by not communicating clearly its reasons for cancelling customer credit cards.
news source : http://www.ft.com/
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