Apparently the 161,000 customers who’ve had their Egg credit cards cancelled recently include three bona fide millionaires – which casts further doubt on Egg’s claim that all these people were credit risks. One of them even has over £100,000 sitting in a share account with Citibank – the owners of Egg since last year.
Egg cancelled the cards after a post-takeover review of its 2.3m accounts – much to the disgust of several customers with perfectly good credit records. The rumour soon spread that Egg had actually cancelled the cards of those inconsiderate types who always pay their bills on time and in full – preferring to keep the disorganised ones who it can squeeze for penalty charges.
But not even the best efforts of Labour MP Nigel Griffiths (formerly a minister for consumer affairs and small business) have persuaded Egg to admit the error of its ways. Griffiths went in to browbeat CEO Ian Kerr this week, but Kerr strongly denied the claims – pointing out that it made a profit on transaction fees, not just account charges.
Impressively (or should that be ‘implausibly’?), Egg claims that it can identify not only existing credit risks – but also those who are likely to be credit risks in the future. In other words, even if you’ve got a good credit history now, that’s not to say you won’t have more dodgy debts than a US sub-prime mortgage broker before the year is out. So either its statisticians have been doing some serious number-crunching, or Kerr has installed Mystic Meg as a non-executive director.
This bears all the hallmarks of a well-conceived customer segmentation exercise gone slightly awry – so lots of perfectly good customers got lumped in with the dodgy ones, forcing Egg to come up with an implausible-sounding explanation (which at least has the benefit of being almost impossible to disprove). Of course Egg’s perfectly within its rights to cancel some credit cards – you’d never have guessed it from the reaction, but it’s not obliged to extend cheap credit to us all. But it’s clearly done a pretty terrible job of communicating the decision to its customers.
Things could get worse, too, if the Office of Fair Trading agrees to cast its eggs-pert eye over the situation. And one thing’s for sure: if this turns into an even bigger PR fiasco that allows other credit card companies to poach their customers, it’ll be no yolk for Egg...