Sam Dunn: Lenders can't survive on price promises alone
Sunday 19 June 2005
My, how they want your business. Two audacious bids were made for your wallet last week.
My, how they want your business. Two audacious bids were made for your wallet last week.
In the chaotic competition for current accounts, HSBC pitched a "price promise" to punters. Buy something on the high street for, say, £25 that you then see elsewhere for £15 and the bank will refund the difference.
Over in the crowded credit card market, Yorkshire building society (YBS) announced a 0 per cent balance-transfer card, defying the doomsayers who believe these deals are lame ducks.
And for those who are simultaneously taking out a YBS mortgage, the credit card comes with a cashback offer that goes towards paying off the loan. But with only 1 per cent cashback payable up to £2,000 (and 0.5 per cent above), spending even this much will get you just £20 off your mortgage.
A deal similar to HSBC's price promise was recently dropped by Barclaycard after it found that its nine million customers made an average total of only 10,000 claims a year, and many of those were from the same canny people.
Both YBS and HSBC say they have carried out extensive research to make sure that, in a saturated market, their products are something people really want.
It's all very well the industry coming up with inventive new products (or gimmicks), but lenders ought to be devoting time and energy to a far more pressing need: a responsible attitude to consumer credit.
It is still astonishing to hear of individuals on very low incomes able to rack up debts of tens of thousands of pounds with a string of credit agreements, cards and loans. How on earth did they get all that credit in the first place? The simple answer is that the lenders involved made mistakes. But just how they failed, and why they keep on doing so, remains a riddle.
Credit checks are supposed to allow financial companies to suss you out when you apply for a card or loan. To do this to the best of their ability, they must be able to get a clear picture of potential customers and their financial history. But this still isn't possible because not all companies fully disclose their customers' track record to the credit reference agencies that hold information about us on databases.
Unfortunately, much turns on a legality. Millions of customers with loans and credit cards have never given their consent for the full disclosure of their details. This sounds like it's our fault but it isn't. Up until the late 1990s, when data protection legislation was changed, the rules on disclosure of personal information were applied haphazardly; many lenders didn't think it important.
The absence of "historic data" is now undermining attempts by lenders to get comprehensive information on customers' financial history. This means that different banks apply different criteria each time a credit check is made.
The industry is working with the Government to standardise credit checks but a solution to the current muddle is still a long way off.
And that's not the only problem. In a rush to reach more and more customers - and hit sales targets - lenders have been guilty of handing out credit to the wrong people.
A BBC documentary last month revealed that Lloyds TSB had granted loans for more than £15,000 without sufficient paperwork to show that proper financial checks had been done.
Unfortunately, the toil is set to continue; the Consumer Credit Bill now moving through the Commons carries not a jot of legislation to address data-sharing.
It's ridiculous that, in a society in thrall to debt and desperate to do something about it, credit applications are still processed in so haphazard a way. The Government must address the problem now.
Barclays's new life insurance heralds a revolution on the high street
How to protect your assets if the stock markets begin to head south again
Head across the Irish Sea for bargain houses
Bargain Hunter: Timing is everything in making big savings on beer, wine and whisky
Mark Dampier: Don't listen to stock market doom-mongers - sit back and enjoy the sun
- 1 Israel-Gaza conflict: 'When Genocide is Permissible' article removed from The Times of Israel website
- 2 Pope Francis issues top 10 tips for happiness
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 The secret report that helps Israel hide facts
- 5 Israel's propaganda machine is finally starting to misfire
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...
£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...
£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
Day In a Page
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000