Select Committee on European Union Minutes of Evidence


Examination of Witnesses (Questions 808 - 819)

WEDNESDAY 10 MAY 2000

MR ROBERT POTTS, MS LINDA WALTON AND MS JENNIFER ALLERTON

Chairman

  808. Mr Potts, Ms Walton and Ms Allerton, welcome. It is good of you to come and spend time with us. It was good of you to put a paper into us in advance of the meeting, which was very interesting. We particularly moved in this direction after having evidence, some months ago now, from a representative from Freeserve, who said to us then, they had been endeavouring to ensure that their customers were aware of their rights in the event of them having difficulties using their credit cards for transactions on the net. They had come under some pressure from some of the card holders to be somewhat more reticent about what they were saying about rights—this is for the public record, it is there and it will be appearing in our Report—and this led us to start showing more interest in the topic. It was good of to you to follow through with your papers to us. Some of us have also had the opportunity of going to Washington and meeting a range of people there. We were also supplied with some very interesting materials from Visa about the extent to which they market themselves in a very open fashion, claiming to offer zero liability in the States for all transactions across the whole of the USA for anyone using their cards. The PR emphasis they were using seemed to have a stronger degree of openness there and encouragement than, perhaps, we have seen in the United Kingdom. I was wondering whether we could spend a little time, initially, on this and ask you what in theory or in practice are the exceptions to consumer protection. In other words, what is in the small print in the United Kingdom? You have given us an outline of what you do offer. Would a consumer be protected in the following situations, which are examples of particular consumer concerns, a consumer using his or her card to purchase from a vetted store only to find transactions relating to other companies appearing on the statement; a consumer using a card to purchase from an unvetted or dubious site, say involving pornography or drug products and an unauthorised or incorrect transaction would appear; thirdly, a consumer using a card to purchase from a site which then totally disappears and no trace can be found yet they have had a transaction. Would you like to comment on my opening remarks and then come around to the particular specifics I put to you.
  (Mr Potts) Thank you very much, indeed, for inviting us. We have a certain amount of interest in this subject because we have enormous customer-base, both individual consumers but also retailers. Something like 6.5 million consumers in the United Kingdom. We also have a growing number of consumers across mainland Europe, Germany, France and Spain. We have invested very strongly in businesses there. We have something like 100,000 retail customers in the United Kingdom and we see e-commerce as an enormous opportunity for credit cards, because it extends the reach of our customers, for purchasers, if they are card holders or sales if they are retailers. It is in our interest to make sure that we make life easy for those customers, whether they are buyers or sellers across the Internet. We have a certain amount of self-interest in improving the situation for those customers. You made a number points, perhaps I can comment on the Freeserve point. Certainly our practice is completely the opposite of what you have suggested there. We have gone out of our way to introduce dispute resolution systems in our business, which are very much consumer friendly. In particular for the Internet last year we launched a charter which effectively underwrites all of our customers if they encounter any fraud across the Internet. There is no limit to that amount, there is no minimum, and so on. The reference to Visa in the States is interesting. I am pleased to see that they are following the example of Barclaycard, because we are already doing that. Legally we are entitled to, if we want to, charge a customer £50 in the event of a fraud. We have never done that in the history of Barclaycard. The most we ever stipulated was £25, and that was many years ago. We very rarely imposed that, we even stopped that £25 some years back. Not only do we have a completely underwritten approach to our customers cross the Internet for fraud but we advertise it strongly. I do not suppose you get time to watch much television but if you do during April and May you may see Angus Deaton telling the world that Barclaycard is looking after its customers across the Internet, and not to worry. It is absolutely in our interests because we want people to use the Internet. In terms of the specific questions you ask, there is no small print. There are, of course, terms and conditions, which there are with any consumer credit arrangement, and those are voluminous. In terms of small print, the only areas I ought to draw to your attention to are two extreme situations where we would exercise some degree of caution in dealing with a claim from a customer, one would be where there was clear evidence of collusion in a fraud. Of course, first party fraud is there and we do get claims from customers who have received the goods and services but claim that they have not. It is difficult to prove, as you might imagine. In some cases we do see that and we would resist that. The other example is in circumstances of gross negligence. In practice there are very few situations like that in ordinary purchases that we would be able to make a stake. Those situations normally occur in the case of transactions of cash, withdrawing cash from a cash point machine, where—maybe you would not believe this but many customers write their pin number down on their card and if they have that card stolen it is open access to their funds. In terms of ordinary transactions, ie non-cash transactions, there are very, very few situations in which we would able to identify gross negligence and make it stick legally. In practice there is no small print. The specific three items that you raised with us, in all of those circumstances we would regard ourselves as responsible for reimbursing the customer.

  809. That is very comforting, indeed. You did write to us with your paper, which was very helpful, on the basis of it being submitted as private and confidential. In the light of what you said we are wondering whether that tack still stands?
  (Mr Potts) It may be that our legal experts are inclined to stamp everything that goes out of our office "private and confidential".

  810. I think this is the problem that may exist, that may lead to the misconception of the type I just described that I hold.
  (Mr Potts) I do not think there is anything in our submission to you we would not want you to tell the world.

Baroness O'Cathain

  811. I think it is brilliant. I have to say, before I ask my questions, that has been my experience. Before you started giving your evidence I said to Viscount Brookeborough I have been using cards for thirty or forty years and I have never once experienced fraud. I think this is all a great myth, really. I have always felt that you did underwrite it. I did have one problem once in Singapore—I was able to prove I was not in Singapore—and when that happened just by virtue of sending photocopies of my passport stamps. Leaving that to one side, in your experience—you obviously keep a track on fraud—is the opportunity for fraud using your Barclaycard greater on the Net than it is just going into a restaurant here on the South Bank somewhere?
  (Mr Potts) No.

  812. That is interesting.
  (Mr Potts) In practice the biggest concern we have currently about fraud is counterfeit fraud. This is in the physical world, making cards. The magnetic strip on the back of the card is vulnerable to copying and you can buy a machine in the States for $200.

  813. If you are stuck at home dealing with Amazon.com and you use your card there would be much less likely to be a fraud than if you were in some small shop.
  (Mr Potts) You are much more likely in a restaurant if there is a dubious waiter or waitress that takes down the details of your card.

  814. You did say you have these advertisements on television saying that you really do underwrite this. Do you not think it would be a good idea to try to increase the awareness of this and in the interests of increasing your business. Many people are saying they do not want to use the Net, because of the probability of fraud—I have heard grown men and woman giving that ad nauseam as their big reason for not using it.
  (Mr Potts) That is precisely why we are doing the advertising and taking such a high profile. We have a very valuable brand in Barclaycard. Our research showed that if Barclaycard put its name behind a guarantee it would double the number of our customers who would use the Internet.

  815. Why do you not do this?
  (Mr Potts) That is what we have done. That was behind the strategy of launching our on-line charter. That is why we are going high profile with the advertising. We will be creating more of this.

  816. For those of us who do not have the time—because we are stuck here—to watch television, it would not be a bad idea to put a sticker on a normal Barclaycard statement each month to the effect that you underwrite fraud because that would encourage your customers to use your card on the Internet. This is a marketing point that I believe would be a great accelerator.
  (Mr Potts) That is absolutely right, you could not be closer to the truth. You could not be closer to our strategy.

  817. I am available for a job, by the way!
  (Mr Potts) Our Marketing Director's job is at risk.

Lord Skelmersdale

  818. Can I follow by saying, I am a director of a small mail order company with a PDQ machine. One of the things you do not make clear in any of your advertising, certainly that I have seen, is that you vet the companies you deal with extremely carefully. This would be another assurance to your companies.
  (Mr Potts) I hope it was not over-vigorous in our case?

  819. We still got it. We had no problems nor had you. You now have competition because there are credit cards that are developed especially for the Net. What do they offer or what do they purport to offer that you feel you do not?
  (Mr Potts) From our point of view we will also be developing cards which are specifically for the Internet. It depends where you start from, most of the companies that are offering Internet-only cards start without an existing card business and they want to get into e-commerce. For them the easiest strategy is to develop an Internet-only card. Our priority is to e-enable our existing business and e-enable our customers. We start with 6.5 million personal customers in the United Kingdom with cards plus 100,000 retailers. Our priority is to help those customers buy on the Net or sell on the Net. You mentioned PDQ, we invented new versions of that specifically for the Internet. It seems to us that by concentrating on that initially we will meet the needs of an enormous existing customer base. What we are doing quite separately is working on—you will hear some of this in the summer—specific products which apply to the Internet as well.


 
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