Low-cost credit card falters in delivery

CREDIT card fraud is down for the third year running, it was announced last week. But as card providers get down to serious competition, one incident has raised questions over the procedures of a new low-charging firm.

Credit card fraud fell to pounds 83m last year, half the level of 1992, and providers are claiming particular progress in ensuring that cards are delivered to the right person in the first place.

Currently, thousands of people are being sent Royal Bank of Scotland Advanta Visa cards - a no-fee credit card carrying a low interest rate of 15.9 per cent. It was launched last month and this writer received hers last week. But in the same package were two other cards for a married couple living in Essex with a credit limit of pounds 3,500. Furthermore, although the address where the cards were sent - London N19 - is considered high- risk by most financial companies, they came by normal post in a plump brown envelope.

Tim Lewis, marketing manager at RBS Advanta, said of the extra cards: "It's a freak - one in a million. I have never heard of this before - it must have been a mistake made by the machine used to stuff the envelopes."

He added that "disguised mail" - in this case the handwritten brown envelope that looks like a piece of personal rather than official mail - is just as effective as a courier and reduces delays. He said this was now the normal procedure for deliveries to high-risk areas.

By contrast, Clare Maythorne, business planning manager for banking products at First Direct, said: "Many debit or switch cards are still delivered by first-class mail, but in high-risk areas we do use courier delivery. This costs more money but reassures our customers and saves us far more in terms of fraud."

Barclaycard also uses courier delivery for around one in five of its cards. In other lower-risk areas, however, many card issuers, including RBS Advanta, still send "undisguised" mail. Midland Bank uses its branch network, calling every customer to ask them to come and collect their cards in person.

RBS Advanta also argued that its Falcon fraud-detection technology monitors can track unusual behaviour with new cards by comparing use to average patterns. "Most people will only use a new card once in the first fortnight, so even a small spending spree would have raised some kind of an alarm," Mr Lewis said.

Even so, if RBS Advanta uses the ordinary mail, why does it not adopt a procedure - routine in telephone banking and familiar to anyone holding a Marks & Spencer storecard - where cardholders must acknowledge receipt by phone and answer security questions for the card to be activated? RBS Advanta says such procedures are not necessary because "a bank account requires a more complex system of security checking than a credit card account".

However, American Express begs to differ. It has used a card activation system in the UK since 1993 after a similar exercise in the US delivered a significant reduction in card fraud.

All companies were adamant that the receipt of three cards in one envelope was a freak. Brian August of Barclaycard said: "Weight and thickness checkers are routine on the equipment used to stuff envelopes and prevent this type of thing." The checkers are not routine at RBS but, said Mr Lewis: "The latest Datacard technology we use includes other ways to prevent this kind of mistake."

RBS said it would compensate the couple whose cards went astray, and noted that these and other cards lost in this way would not leave the named individuals liable in any way.