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04/02/08

Egg withdraws 161,000 credit card accounts

Internet bank Egg is withdrawing the credit cards of customers whom it believes pose an unacceptable risk.

Egg has sent letters to 161,000 of its customers, informing them their credit cards will stop working in 35 days. Egg says it's nothing to do with the credit crunch; it's because the users have bad debt histories.

Egg has claimed that the customers, who represent 7% of its two million credit cardholders, had a 'higher than acceptable risk profile'.

However, many of those affected insist they always pay their bill off in full every month, never go over their limit and have excellent credit ratings. This prompted speculation that the internet bank made the move because the customers did not make it enough money, although this is something Egg denies.

In an interview with the BBC, one card holder who received a letter commented: "My first thoughts were that this is a mistake; that can't be possible because we pay off and have done ever since we've had this card we pay it off every month, we've never exceeded our limit and it just can't be."

Egg said it stood by its decision. Egg's American owners Citigroup wants to ditch customers who it sees as a liability and said so in this statement.

"The customers affected had a higher than acceptable risk profile. The decision to end these customer agreements was taken after conducting a risk review of our book following the acquisition of Egg by Citi in May 2007."

Angela Knight, Chief Executive of the British Bankers Association said: "The generality of trying to ensure rather better that individuals don't get themselves into financial difficulty and don't borrow when they can't afford to pay back is part of the responsible lending criteria and responsible lending framework in which we all want to operate."

So far those affected won't have to pay off their bills straight away, but it will put further pressure on those already in debt.


Credit reference agencies have moved to reassure anxious Egg customers that the lender's decision to cancel their credit cards would not affect their credit rating.

James Jones, of credit reference agency Experian, remarked: 'Your credit report simply shows what credit you have and how you are repaying it.'

'Egg are not changing the terms and conditions, just withdrawing people's ability to use credit cards for new transactions.

'If you have no balance on your card then that account will be closed, which will have a positive impact on your credit report.'