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Egg on Citigroup's face
Feb. 4th, 2008 12:52 pmSome curious goings-on at the weekend. First it was announced by Egg, bought from Prudential by Citigroup, that it would be closing the accounts of 160,000 Egg credit card holders. The line hinted at by Citigroup, and swallowed hook line and sinker by the financial journalists, was that this was because of the credit crunch and the flight from risk. All risky customers were now no-go areas, it was intimated.
But then another story began to leak out. God bless the power of the interweb and live responses to news items. People whose credit history was exemplary had apparently been chucked out, while others, who were often "maxed out", had received no such lettter telling them to fuck off.
Angela Knight of the British Bankers Association said that it was a sensible business move and that sometimes you had to tell customers, for their own good, that they have to stop spending. The BBA is the kind of organisation that would back banks if they came out in favour of shooting people who did not have bank accounts. OK, you expect associations representing interest groups to be full of bullshit, but the BBA seems to excel even in this competitively odious field. To try to spin this into something philanthropic, like a nurse giving some painful medicine to a child because it's for the child's own good in the long run, is disingenuous to the point of vomit-induction.
Anyhoo, it looks to this humble writer as if the truth of the matter is that Citigroup has used the excuse of the credit crunch to weed out unprofitable customers, not necessarily just customers with a bad credit profile. Citigroup has been trying variants of this for a long time. Twice in the past five years I have received a letter from my Mastercard operative (Citibank, UK account) saying that, unless I used my card within 30 days, it would be discontinued. Twice I've used it the requisite one time. Eventually, I don't doubt, I will receive a letter saying that my card will cease to be valid after a certain date, and that's that.
Much of this is basically down to those tossbags who are getting refunds for "unfair" bank charges imposed when they went into the red without telling the bank that they were doing so. This was a great money-earner for the banks and meant that, in a market where responsible borrowers were fought for, it was excellent financial news for people who weren't so hopeless at bankroll management that they broke the rules. We got free current account banking and free credit cards. That these gitmeister unauthorised borrowers should now be getting refunds (which, indirectly, I shall have to pay for) is doubly galling.
I went through my irresponsible period and I think that a debt to Lloyds in the late 1980s was about six hundred quid higher than it would have been (or, about 200% higher), than if no unfair charges had been imposed. But, I paid it (eventually). Then I closed my Lloyds account and told them to go screw themselves. If they'd been a bit more understading, they would have retained a customer. They weren't, so they didn't. And now I've got the cash, and Lloyds does't have my custom.
But I didn't even think of sueing them for my money back. Hell, it was my cock-up, and they were acting within their rights at the time.
Banks (and most private enterprises) are very bad at coping with the fact that people change. A "bad risk" is a bad risk. That a 20-year-old bad risk might become a desired 35-ywear-old customer and therefore deserves nurturing, is just not something a bank will think about -- mainly because no private institution ever looks 15 years ahead any more. Lloyds is a bit of a basket case at the moment. Many of the reasons for that are a legacy of the short-term actions senior executives at the bank took 15 years ago (which were doubtless supported by the BBA then). Banks like Citigroup are making the same mistake today. They just see a snapshot, not the bigger picture.
Sell.
But then another story began to leak out. God bless the power of the interweb and live responses to news items. People whose credit history was exemplary had apparently been chucked out, while others, who were often "maxed out", had received no such lettter telling them to fuck off.
Angela Knight of the British Bankers Association said that it was a sensible business move and that sometimes you had to tell customers, for their own good, that they have to stop spending. The BBA is the kind of organisation that would back banks if they came out in favour of shooting people who did not have bank accounts. OK, you expect associations representing interest groups to be full of bullshit, but the BBA seems to excel even in this competitively odious field. To try to spin this into something philanthropic, like a nurse giving some painful medicine to a child because it's for the child's own good in the long run, is disingenuous to the point of vomit-induction.
Anyhoo, it looks to this humble writer as if the truth of the matter is that Citigroup has used the excuse of the credit crunch to weed out unprofitable customers, not necessarily just customers with a bad credit profile. Citigroup has been trying variants of this for a long time. Twice in the past five years I have received a letter from my Mastercard operative (Citibank, UK account) saying that, unless I used my card within 30 days, it would be discontinued. Twice I've used it the requisite one time. Eventually, I don't doubt, I will receive a letter saying that my card will cease to be valid after a certain date, and that's that.
Much of this is basically down to those tossbags who are getting refunds for "unfair" bank charges imposed when they went into the red without telling the bank that they were doing so. This was a great money-earner for the banks and meant that, in a market where responsible borrowers were fought for, it was excellent financial news for people who weren't so hopeless at bankroll management that they broke the rules. We got free current account banking and free credit cards. That these gitmeister unauthorised borrowers should now be getting refunds (which, indirectly, I shall have to pay for) is doubly galling.
I went through my irresponsible period and I think that a debt to Lloyds in the late 1980s was about six hundred quid higher than it would have been (or, about 200% higher), than if no unfair charges had been imposed. But, I paid it (eventually). Then I closed my Lloyds account and told them to go screw themselves. If they'd been a bit more understading, they would have retained a customer. They weren't, so they didn't. And now I've got the cash, and Lloyds does't have my custom.
But I didn't even think of sueing them for my money back. Hell, it was my cock-up, and they were acting within their rights at the time.
Banks (and most private enterprises) are very bad at coping with the fact that people change. A "bad risk" is a bad risk. That a 20-year-old bad risk might become a desired 35-ywear-old customer and therefore deserves nurturing, is just not something a bank will think about -- mainly because no private institution ever looks 15 years ahead any more. Lloyds is a bit of a basket case at the moment. Many of the reasons for that are a legacy of the short-term actions senior executives at the bank took 15 years ago (which were doubtless supported by the BBA then). Banks like Citigroup are making the same mistake today. They just see a snapshot, not the bigger picture.
Sell.
