Further memorandum submitted by Lloyds
Peter Ellwood agreed to expand upon his answer
to the Treasury Select Committee on 14 May 2002 in respect of
the Lloyds TSB Asset Advance card. Accordingly, I am responding
on his behalf.
In paragraph 238 of the Select Committee report
Mr Plaskitt referred to work done by the Consumers' Association
(CA) in November last year which highlighted discrepancies in
the amounts of interest charged by HSBC, Barclays, Royal Bank
of Scotland and Lloyds TSB credit cards, all with an APR of 18.9
The research correctly illustrated that Lloyds
TSB's and its competitors' credit cards, with an interest free
period of up to 56 days and an APR of (at that time) 18.9 per
cent., incurred an interest charge of £5.79.
However, Mr Plaskitt made a number of negative
remarks about the Lloyds TSB Asset Advance card, noting that,
in the CA's research, this incurred an interest charge of £7.48.
I should point out that this product is designed specifically
for (and marketed to) customers who borrow money on their credit
cards for longer periods. The Asset Advance Card therefore offers
a much reduced rate of interest of 11.9 per cent APR, but purchases
incur interest from the day on which they are made. The Asset
Advance Card should not, therefore, be compared with other standard
credit cards. Whilst the Asset Advance Card is more expensive
for purchases over a short period of time, it is clearly cheaper
for customers who do not pay off their credit card balance for
a number of months and, indeed, it can be considered as an alternative
to commercially available short term unsecured loans, for which
similar rates apply.
I should be grateful if you would reflect this
information in the Committee's final report. Please let me know
if there is anything more which you would like us to clarify.
Head of Public Affairs
16 July 2002