British Internet bank Egg says it is ending 160,000 customers' credit card agreements

[Robbien]

Source: AP

LONDON (AP) - British Internet bank Egg said Saturday it is terminating about 160,000 customers' credit card agreements, saying their credit profiles had deteriorated.

Egg Banking PLC was bought by Citigroup Inc. last year, and the company said the move was the result of a «one-off, extensive risk review of our book» after the acquisition. The figure represents about 7 percent of Egg's credit card customers.
«Egg has given a number of its credit-card customers 35 days' notice that it is ending their card agreements,» the bank said in a statement. Egg said its customers would still be able to repay their balances, either monthly or in full.

. . .

«Of course, no one should be forced to give credit to anyone. In fact, I've accused this industry of too easily giving credit in the past and not making proper checks,» the Scottish legislator said


«But in this case they seem to be almost indiscriminately taking people off their books and there is a strong suspicion that these are people who _ because they don't actually get into debt and start paying high monthly interest charges _ ... may not be the most highly profitable customers and they're being cleared off the books,» Griffiths said.

Read more: http://www.pr-inside.com/38-world-news.htm

[Deja Q]

1. The yolk's on them...

[CreekDog]

3. I disagree

For the bank, this is egg on their face.

:spank:

[VP505]

5. Yes, and it

will scamble their customers credit too!:-)

[Coexist]

8. they were over-easy on approving those people.

[superconnected]

15. You didn't read. They're getting rid of the people NOT in debt.

At least that's what the article suspects.

[aquart]

2. Be interesting to see how soon they regret that.

[Captain Angry]

4. If the US job market doesn't improve...

Credit card companies are going to make some major money on late fees and interest payments.

Egg bank must not have had a very good system to handle delinquent payments if they would throw away that much money.

[L0oniX]

6. I just had a CCC drop me because I had not used the card enough.

Well the problem with that is that I have other cards with 7.9 and 8.9 fixed interest rates so why would I use one that was 13%? Ask me if I care that they dropped me. My home is paid for so they can shove their credit score game, like a greased asscarrot right up their ass. pffft

ps: I wouldn't use a Citi CC if you paid me.

[Captain Angry]

9. I have credit cards with better rates that the one I use all the time.

But since I don't carry a balance, the rates are immaterial.

I use the Blue Cash Amex since they give me money for using their card. No annual fee, no interest to worry about, and several hundred dollars in free money every year.

I should probably get back to using my other card more frequently just to make sure it stays "alive."

[Critters2]

11. Wamu just did this to me.

Closed my account because I didn't use it enough. Oh well.

[fedsron2us]

7. Egg has claimed that the card holders had "higher than acceptable risk profiles"

http://ukpress.google.com/article/ALeqM5iT6M_o7fBnHp_qtGAn-nykGGq7fw

However, it is clear from the individual cases investigated by the British media that many had nearly perfect credit scores and no histories of default.

http://news.bbc.co.uk/2/hi/business/7223813.stm
http://forums.moneysavingexpert.com/showthread.html?s=014c3ea17e30abc60a31f292be972c04&t=717227&page=2

One must therefore surmise that the cull is aimed at unprofitable rather than impecunious customers.

Citigroup's subsidiary might perhaps have been better advised to have declined to have given any reason for their action rather than publicly implying that the individuals concerned were likely to default on their borrowings. Certainly, such a statement about people with good credit histories comes perilously close to defamation, particularly if it is likely to damage an individuals chances of obtaining future loans. US banks might do well to note that British courts are more than happy to dish out damages for libel.

http://en.wikipedia.org/wiki/English_defamation_law

[NJCher]

10. It's happening here, too

I learned this today. I have a friend who is rather savvy about shifting her credit card balances around. She has great rates on cards (2.99, 3.99, etc.) and when one ends, she shifts the balance from that card to another good deal. She keeps a detailed record of what she has to do to keep the rate and she pays on time to protect her rates.

She received a phone call from Citicards this week. They called it a "courtesy call" and told her they were lowering her credit line by 10k. She responded to the call by asking if she had any choice in the matter and when told no, she said well, this isn't really a courtesy call then, is it?



Cher

[Skittles]

13. does she know

that if she pays them off every month the rate is zero?

[NJCher]

20. oh yeah

She can't pay them off. She's just moving funds around until a big inheritance check comes in.



Cher

[ursi]

12. so, does this mean the credit card business, as we know it, is drying up?

[fasttense]

14. Yes, no longer can your dog or 12 year old get a credit card. n/t

[superconnected]

16. Cause via the article if your dog or 12 yo doesn't use it and go into debt

they are not profitable enough to the bank so the bank will axe them.

[crimsonblue]

17. Impending global depression?

After seeing the news and financial reports from across the world the past month, it seems evident to me that we are seriously in danger of a global financial crisis. Everybody for the past 20 years has hedged their bets on the back of American economic might. I wouldn't be surprised if an economic collapse in the US leads to global chaos. Thanks Dubya, for fucking my future over so that you can get your rocks off in Iraq.

[FarCenter]

19. It's mainly a US, UK, Australia, Spain and Ireland thing

It's the Thatcher/Regan impulse to deregulate everything run amok.

The UK is in a little worse crises that the US, since their housing bubble is worse than ours. See Northern Rock.

There is a high and rising foreclosure rate in Australia.

Ireland and Spain are both euro countries, but got sucked into the UK's orbit on this.

Other countries are mainly damaged because they are holding bogus paper peddled by the creative financial types in the City of London and New York. But most non-Anglo/American central bankers were burned by previous manipulations (Thai/Malaysian currency manipulation, Soros' run on the pound, Argentinian and Mexican bailouts, etc.) that they had adopted defenses.

[FarCenter]

18. They are also getting rid of customers who pay off monthly

According to other stories, Egg is also canceling the cards of people who pay off their cards monthly and don't incur fees or interest charges.

These customers are unwelcome, since Egg (Citibank) has to cover their costs with transaction fees. When you use a credit card, the merchant gets hit with a fee for the transaction which would typically be between 1% and 5% of the purchase price. This gets split 3 ways -- 1) the merchant's bank, 2) the network such as Visa or Mastercard, and 3) the card issuing bank. If it is an "affinity" card, the sponsoring organization might get a cut as well.

The best deal for customers is to use a "no annual fee" card, with a "cash back" reward of 1 to 3%, and to pay it off every month. The customer should be able to avoid paying anything except a little less than 99% of the price of the purchases -- since the cash back is effectively a discount. The merchant will be charged a higher fee if you use this type of card, but the merchant doesn't have a choice to accept some cards in a network and not others. The card issuing bank will hate you.

The best deal for the bank is a customer who pays a high annual fee for some special-colored gold or platinum card, who either gets no reward or else rewards such as airline miles that the bank doesn't pay much for, and who runs a high balance. Preferably the customer will not have good enough credit to move his balances around in response to low interest rate offers. Preferably the customer will go over the credit limit or miss the payment due date occasionally, so that the interest rate can be jacked up to the maximum and so that exorbitant over-limit and late fees can be collected.

Just remember that if you are paying any interest or fees for a credit card, you are subsidizing the people who are stiffing the card companies by not paying when they go bankrupt or skip out. About 3.5% of purchases are uncollectable, and they are covered by charging the people who pay their bills enough that the banks really don't care too much about the deadbeats.