Egg acts over 'risky' customers

[Steve Gardner]

Before you read the following article, go and watch Money as Debt.

Now, mindful of what you've just watched (that the global economy is utterly dependent upon the creation of new debt), read the article below from the BBC, paying particular attention to the EGG customers who have contacted them.

Credit cards are to be withdrawn from 161,000 Egg customers who it believes pose an unacceptably "high risk".

The internet bank is writing to 7% of its customers to give them 35 days' notice of the withdrawal.

Cardholders will be able to continue making minimum monthly repayments on their balances but will not be able to spend any more after the deadline.

The move follows a "one-off" review after Egg was bought by US-based Citigroup for £575m last year.

In a statement, the bank said it was not demanding immediate repayment of balances or making any changes to customers' terms and conditions or their interest rates.

The 35-day notice period starts on receipt of the letter, which also provides details of how to appeal against the decision.

Risk profile

Letters will be followed up with e-mails to customers.

Egg was sold to US banking giant Citigroup in May 2007 by life insurer Prudential.

It prompted the review, which picked out customers considered to have "a higher than acceptable risk profile".

Angela Knight, chief executive of the British Bankers Association, said that Egg's action was "a sensible way of looking after a business".

"Whilst it is lovely to spend, it is the paying back that is always the difficulty. It might seem a bit hard to say to people 'You do need to stop spending' but it does actually make real sense so to do."

Peter Brooker, public affairs director of credit reference agency Experian, said the move would not have a negative impact on the credit rating of those affected and could even improve it.

Positive effect

"Credit reports only have balances showing as outstanding or settled and a date. So when Egg updates its portfolio with us, it would just say those accounts have been settled," he advised.

"That will not have a detrimental effect, it may even have a positive effect, but that depends on the scoring mechanisms used by lenders and the other balances the individual has.

"Some lenders might feel that someone with five credit cards is a risk but someone with four is a better bet and the fact that one card has been settled could be a positive sign. To other lenders it may make no difference. You can't generalise."

The 161,000 customers whose cards are being withdrawn had had a deteriorating credit profile since they signed up, according to Egg spokeswoman Rachel Roe.

This could include those who have missed repayments or exceeded their credit limit.

But the description has angered some customers who told the BBC that they had received a letter informing them of the withdrawal, despite having an excellent credit history.

They claimed that by making repayments strictly every month, Egg was not making a profit from them in interest.

Tightening market

Gillian Cox, of Farnham, Surrey, said she was "absolutely furious" to learn that her credit card had been cancelled in what she described as an "unbelievable arbitrary action".

Mrs Cox said she and her husband are "retired, no mortgage, no debts" and "always paid the balance off in full each month".

She added that she had contacted Experian who informed her that she was marked as having an "excellent" credit rating, "thus totally negating Egg's claim that this measure is about credit risk".

Egg's decision could be a signal of the tightening credit market, with consumers facing more difficulty in repaying debts and cutting spending.

But Ms Roe said the appraisal was the result of an unusual set of circumstances owing to the change of ownership last year.

"There are no plans for a future review," she said.

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Are you one of the Egg customers that has received this letter? What's your reaction to this story? Send us your comments by filling out the form below.

I'm an egg customer also and after reading this report thought that I would be one of the ones affected. We regularly max out our egg card through balance transfers. "Risky customer" you may think, but not so it seems. I have yet to receive a letter so this seems to bear out what everyone is saying about maximising profits
Dave, London UK


I too have just received one of these letters. I have had an Egg card for almost 8 years and have never missed a payment (like others here I usually pay off the balance if I have one) and have never gone over my limit and my credit rating is excellent. It seems to me that Egg are picking on those who are in control of their finances and therefore not paying them lots of interest. If they deem fit to remove my Egg card, I shall be removing my Egg Savings (which has a far larger balance than my Egg card!). I think this is disgraceful behaviour on their part.
Mary, Edinburgh


Egg MAY be cancelling high-risk customers, but they are also apparently ditching those, like me, who pay no interest because we are GOOD creditors! Its disgusting that they are making out its just the bad ones who are being dropped. Fair enough if that's what they want to do, but don't send a really upsetting letter that makes it sound like we have a bad credit history all of a sudden. Good riddance to them, I say, if that's how they treat people.
Trevor Smith, Nottingham


I too had the "Your Egg Card has been cancelled" letter....very rude to put that before the Dear Sir or Madam! I too checked my credit rating as I was alarmed with the High Risk label I was being given....NO problem, excellent credit rating! I agree with other comments, it seems I was not making them enough money as I paid my balance off. There was also no way of appealing. I asked when I rang and was given a very curt "No".
Jane, London


I received the letter yesterday. What angered me most was the suggestion that the decision may have been the result of some detrimental entry to my credit report, causing me to fear that I may have been the victim of identity theft. This put me to the needless expense of obtaining a copy of my credit report, which of course is fine. The letter from Egg consisted of a tissue of lies which were merely a smoke-screen for the real reason behind the decision which I suspect is that I don't use the card enough. Why couldn't they just be honest and say that - but then I suppose the two words "honest" and "banking" don't sit well together these days do they!
Chris O'Shea, Woking, Surrey


I received this letter yesterday, I'm not sure why. I've been an Egg card holder for five years. I've always met the repayments and a year ago I paid off my whole £2000 balance in one go and have not used the card since. Perhaps Egg is equating 'high risk' with unprofitable?
Chris, London


After receiving my letter yesterday, I checked my credit rating. It's one of the highest possible. I told egg and they agreed that I was a "perfect customer" but they will not reverse their decision. There is no information on how to appeal in their letter.
Kirsty, London


I was notified yesterday that my account is to be closed. For Egg to say I'm a risky customer is a joke. I have a mortgage and a loan which I have never missed any payments on. The reason they have cancelled my account is that I pay the balance off each month. That's what they don't like. Luckily I already have other credit cards just waiting to be used so it hasn't impacted on me. It's just left me annoyed that they treat a loyal credit worthy customer of 5 years like this.
Mark, Sheffield


I had a letter from Egg yesterday about this. My Credit Record is excellent and I actually took out an egg loan 3 months ago!.

My Egg Credit card has not been used for over 6 months and had £0 owing. Some customers are being ditched because in my view they are not making Egg any money.
Dave Ware, Herts


As one of those affected by egg's decision. I would vehemently deny that I am a 'risky' costumer. I am homeowner who has never missed a payment on his debt. I can only guess that because my debt with Egg is low (under £700) that they deem my account as unprofitable.

For Egg to withdraw my account in this manner is an insult and to label me a 'Risky' customer in the media is a further affront.
Jonathan, Bristol, uk