Eventful year so far for Egg

The Internet financial giant Egg has already spend a good deal of this in the financial news, having been under fire a number of times, being pressed for apologies and changes to policy from MPs, being accused of compromising on service to customers in order to profit, and more.

It has been a very eventful year for Egg, which has now been taken over by CitiGroup, and below we can see a rundown of just what has happened with Egg so far this year.

The credit card fiasco

In a shock announcement earlier this year officials from Egg stated that they had contacted around 161,000 customers to inform them that their credit cards would no longer be valid after 35 days had gone by. Egg decided it was cancelling the tens of thousands of credit cards, because the cardholders had been identified as high risk following an extensive review.

An official from Egg at the time said: “We are sorry some customers are upset after receiving notification we are ending their credit card arrangement, but they are people we do not feel it is appropriate to lend any money to. The decision was taken after an extensive one-off review of our credit card book following acquisition by Citigroup.”

Around 7% of Egg’s credit card customer base was affected by the decision, and there was outrage as consumers demanded to know why their credit card facilities were being withdrawn.

Many claimed that they had excellent credit and had never missed a repayment on the card, yet they had still had their credit card facilities withdrawn.

Rumours soon began to emerge claiming that the real reason behind Egg’s cancellation of these credit cards was that the customers were actually good payers, and therefore Egg was not making enough profit from them in terms of charges, fees, and interest – a claim that Egg officials denied.

As a result of the fiasco an investigation was called for, and a meeting was arranged between the chief executive of Egg, Ian Kerr, and the former consumers affairs minister and Labour MP, Nigel Griffiths.

Prior to the meeting Griffiths had stated: “Egg has got a lot of explaining to do. If you want to get rid of customers who are not bad credit risks but who you just don’t make money out of, then you should make a charge for your card.”

He added: “Egg’s job now is to prove they have an honest intention in this. They made a mistake, we need an apology and compensation for wasted credit agency checks.”

However, the meeting did not go quite as expected, as Egg still refused to back down. After confirming that the cancellation of cards would still go ahead, Egg issued a statement saying: “The review was based upon a large number of variables and studied the level of risk inherent in groups of customers, rather then every individual.

So while some customers in that group may be up to date with their payments and have a good record with credit reference agencies and so on, the probability of them becoming a higher-risk customer in the future is higher than we wish to accept.”

Savings interest rate cut

Shortly after upsetting so many customers, Egg took another bold step into the realms of controversy. Shortly after the Bank of England cut the base rate by 0.25% a number of lenders announced that they were also cutting the interest rate on their savings accounts by the same amount, which was deemed fair enough.

However, Egg announced that it was doubling the rate cut, and promptly slashed the interest rate on its savings account by 0.5%, thus upsetting a further half a million customers.

The savings account from Egg had come with a guarantee that it would pay at least the base rate until the end of 2007. However, as 2008 came along Egg swiftly took the opportunity to slash the interest rate by double the rate cut that had been applied by the Bank of England.

Kerr resigns

Just weeks after all of the upset over interest rates and card withdrawals, the chief executive of Egg, Ian Kerr, announced that he was resigning, fuelling rumours that he was leaving as a result of the credit card fiasco.

Egg officials denied that this was the case, and CitiGroup expressed sadness over Kerr’s resignation, stating: ‘Ian has played a critical role in helping us to integrate the Egg business into Citi and he has also developed our strategy for a single unified business in the UK.’

However, upon hearing about the resignation, MP Nigel Griffiths said: ‘Egg presided over a PR disaster, withdrawing cards from thousands of perfectly respectable customers and failing to give full and honest reasons. I warned the company that their letter to customers was a serious mistake and urged them to make public a full explanation. Sadly my advice was ignored.’