Magazine article Marketing

ANALYSIS: Credit Card Activity under Scrutiny

Magazine article Marketing

ANALYSIS: Credit Card Activity under Scrutiny

Article excerpt

Marketing transparency is on the agenda as banks come under the spotlight for 'cynical' credit card offers. Ben Bold reports.

Last week was not a good week for the big banks, as they were accused of 'bare-faced cynicism' in the way they treat credit card customers. The accusation was made by a panel of MPs at Thursday's Treasury Select Committee (see box), which probed the chief executives of banks including Barclays, HBOS, Royal Bank of Scotland and Lloyds TSB.

It also led to the now-infamous admission from Barclays chief executive Matt Barrett that he didn't use credit cards because they were 'too expensive'.

So are bank marketers likely to take over the mantle from their colleagues in the food industry as the most in danger of increased legislation ?

The government is keen on cleaning up the industry. Concerned about transparency in financial services, the DTI is reviewing the Consumer Credit Act and will publish a White Paper on it this autumn.

As a consequence, the Select Committee has been appointed to look at a range of issues, including credit card marketing, and in par-ticular the definition of APR rates and use of small print, which could have a huge impact on financial services marketers.

Two days before the committee sat, The Guardian published consumer credit research that claimed that the ease with which consumers can get credit has led to a 70% increase in arrears.

Barclaycard marketing director Alison Hutchinson acknowledges society's high levels of debt. 'The general feeling is that consumer debt is running out of control,' she says. 'To rise at the current levels is unsustainable.'

The Credit Services Association, a body representing the nation's debt collectors, commissioned the Guardian report, which was conducted by Leeds University Business School. Despite a picture of a Barclaycard illustrating the article, its prime target was the back-page lenders that fill the tabloids.

In contrast, Thursday's committee plainly targeted the supposed bastions of respectable business: the banks. One member of the committee even described the marketing tactics employed by credit card providers as 'a bait and a trap'.

Misleading information?

But while bait uses deception, marketing uses persuasion. So the issue is whether credit card marketing is misleading consumers.

The fact is that borrowing has never been such big business. 'The fundamental issue is about the society we live in - a consumer society that is based on immediate gratification,' says Paul Gordon, managing director of financial advertising and marketing specialist Camp Chipperfield Hill Murray. 'In the main we don't have the cash available to buy what we want. So the only way we can access what we need is by getting a loan.'

Coupled with the economy's rock-bottom interest rates, this societal shift in consumer attitude toward debt has led to an escalating propensity to borrow. And advertisers are focusing on this. Credit card ads offer borrowers 0% interest and cash-back deals. But they don't necessarily stress the pitfalls of faulting, the fluctuating levels of interest over the period of credit, or that payments often pay off low interest rates first - this is where they may be attacked. …

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