Egg faces customer backlash in PR blunder

by Daniel Farey-Jones Brand Republic 04-Feb-08, 08:50

LONDON - Internet bank Egg has suffered a backlash of protest, after notifying customers it was stopping their credit cards because it saw them as credit risks, from some who complained they were singled out because they were unprofitable.

The bank last week sent letters to 161,000 customers, about 7% of its client base, to tell them their cards would be stopped in 35 days because their credit profiles had deteriorated since they signed up.

However, many of those notified have complained to media organisations such as the BBC that their credit card spending is under control and they suspect Egg has taken the action because it makes little profit from their accounts.

Some have even checked their credit profile. For example, Margaret Wickens, who told the Sunday Telegraph her Experian credit rating was 999 out of 1,000.

Egg, which changed ownership in May last year when it was taken off Prudential's hands for the sum of £540m by Citibank, hit by the sub-prime market loss. It is now facing calls for an investigation into its actions.

John McFall, chairman of the Treasury Select Committee, said at the weekend: "The motives of Egg need clear explanation if this is a case of them ditching long-standing credit worthy customers because they make no money out of them.

"Perhaps this is an issue that requires an Office of Fair Trading investigation."

Peter Thornton, a Liberal Democrat councillor in the Lake District and one of those affected, told the Mail on Sunday: "This is more than an amazing PR blunder. There's a huge amount of people in my position.

"I'm on a lower interest rate because presumably they've assessed me as a good risk.

"Every business would benefit from losing 10% of the least profitable customers, but the rest of us realise we can't do that because it would be a PR disaster.

"They're on the radio saying it's just bad-risk people they're getting rid of. I feel slandered by that."

An Egg spokesman defended the move, saying its review was "robust and fair" and was not an "excuse to get rid of unprofitable customers".

Comments

Bob Aldred - 04/02/2008

A clear case of EGG on their face!

Rory Sutherland - 04/02/2008

This is quite an interesting idea on Citi's part. What you might call customer asset stripping. You buy a business with a mixed customer profile, then tell all the drossy customers to get lost. Who else could this work for???? Hmmm.

Hannah Lines - 04/02/2008

They are keeping many of their customers who regularly max their card as they pay the minimum and are far more profitable. I wonder if any customers have started up a Facebook petition they did with Barclays? Needless to say, I'm changing my Egg credit card shortly.