Saturday, February 02, 2008

Egg sacks 7% of its customers

Credit card provider Egg, now part of Citigroup, has stopped the credit cards of 161,000 of its customers, about 7% of its entire base. Apparently this is because they are 'high risk' and it the straightened economic climes represented an exposure that the financial institution was no longer willing to accept. However, many of their understandably miffed ex-customers do not seem very high risk. In fact they seem to be the sort of people who manage their money well, and who pay down their credit card debt entirely every month. This gives us a clue as to what is really going on. No doubt some of those dispensed with are generating too-high credit risks, but some are probably the opposite, generating no actual credit at all, and hence generating no profit for Egg. Instead of coming clean that people who pay in full every month actually cost it money because of the expense in servicing their accounts, Egg is instead trying to pretend that it is acting solely as the soul of prudence. That this means putting all of the blame on its customers and worrying people all over the country. Egg's new management must know that brand damage can stick, and Egg cards might be a tough sell after this. The only conclusion is that a mix of poor cost control and poor risk management has put Egg into a very bad place indeed.

Let us hope that this is the only card issuer that finds itself in this sort of bind. Otherwise it would be an indicator of a much wider economic malaise.

Tuesday, January 29, 2008

Derek Conway Out

What a Contrast. Peter Hain is found to have undeclared donations of over £100,000 via a sham think tank and he hangs on for weeks until the police are about to call before resigning his post while Gordon Brown dithers. Derek Conway, a Conservative MP, is found to have put his sons on staff and paid them thousands for doing nothing and David Cameron sacks him the parliamentary party the day after the story breaks. Indecision on the part of the Prime Minister versus decisiveness and leadership from the Leader of the Opposition. Cameron has clearly done the right thing, and his firmness about a misuse of the public purse contrasts with Labour's unwillingness to deal with borderline corruption.

Conway, on the other hand, is beneath contempt. We had him on the shortlist for the Billericay selection some years ago, but he fell by the wayside when the selection committee checked his references. Though personally plausible, no-one who had worked with him had anything positive to say about his personality or his abilities. Pity Bexley weren't so thorough.