New Clause 1 - Credit-token specification
Consumer Credit Bill
3:44 pm
Mr James Plaskitt (Warwick and Leamington, Labour)
Perhaps the hon. Gentleman misheard me. The use of a credit-card cheque does not extend anyone's credit limit. However, if a card-holder receives an unsolicited credit card cheque and is encouraged to use it, they will use up some of their credit limit, which may result in the need to extend their limit earlier than otherwise would have been the case. I accept that argument, which credit issuers use in defence.
I wish to highlight the consequences of responding to encouragement to use up credit card limit by receipt of the cheques. In October 2004, the four principal issuers appeared before the Select Committee on Treasury. I asked them to justify their practice of issuing these unsolicited cheques. Their responses were interesting. Mr. Varley, the chief executive of Barclays, argued that customers use the cheques to effect balance transfers from one credit card account to another, perhaps to take advantage of an introductory offer that would, for a time, reduce the interest payable on the balance. Sir Fred Goodwin, the chief executive of the Royal Bank of Scotland, suggested that the practice allowed customers to pay for goods or services that they might not otherwise have been able to pay for. That echoes a point raised by my hon. Friend the Member for Rhondda (Christ Bryant). Mr. Flynn, the chief executive of MBNA, said that it gave people an opportunity to access their credit line. Mr. Geoghegan, the chief executive of HSBC, claimed that the practice was justified because people who do not have bank accounts find it easier to use a credit card cheque.
Interestingly, none of the four justifications addressed the word ''unsolicited'', which was included in my question. They were making an argument for the existence of credit card cheques, and I might be prepared to concede those points. However, they do not make convincing arguments for the unsolicited issuing of cheques. That is the purpose of my new clause.