IG Index flotationhit by credit dispute

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The Independent Online

IG Index, the spread betting group which floats this month, has been caught up in a row about whether customers have been allowed to run up thousands of pounds' worth of debt - despite having far lower credit limits on their accounts.

IG Index, the spread betting group which floats this month, has been caught up in a row about whether customers have been allowed to run up thousands of pounds' worth of debt - despite having far lower credit limits on their accounts.

The Independent on Sunday has been contacted by a reader who was allowed to run up debts of more than £20,000 with IG Index. Yet she had requested, and been set, a £1,000 credit limit.

IG Index last week announced it will float on the stock market on 19 July at 240p a share, valuing the business at £125m.

It took the former accountant just six weeks to record the losses, betting on movements in the Dow Jones and Nasdaq indices, and on the share price of online retailer Amazon. Her account has been closed and she is being forced to sell her flat to pay the debt.

"I thought I knew what I was taking on as I know how indices and shares work," she said. "I requested a £1,000 credit limit because I thought I could afford to lose that.

"But if they had told me that I could lose 20 times my agreed credit limit, there is no way I'd have opened an account."

The Financial Services Authority Complaints Bureau has seen a steady rise in complaints, all involving sophisticated, knowledgeable investors. The fear is that the growing popularity of spread betting on sport will generate a new breed of clients who are even less aware of the risks.

"We would be extremely anxious if the number of people involved in [spread betting] were to expand," says David Cresswell, spokesman for the FSA Complaints Bureau. "With articles on spread betting regularly appearing in popular newspapers, the risks are being devalued."

There is little action that the industry regulator can take at present, although a source agreed that wording on contracts can be misleading. "I totally agree that it is not a credit limit at all," she said. "All we can emphasise is that [clients] need to know what they are getting themselves into."

IG Index says that the credit limit operates like a trading limit - once the client goes over it, a margin call is made demanding immediate payment.

"Clients need to prove they can afford to lose money and that they know the risks before they open an account," says Paul Austin at IG Index. "You can lose more than your credit limit but as soon as it has been hit we immediately [alert the client]."

RISKY BUSINESS, PAGE 16

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