Egg withdraw thousands of credit cards: a wise precaution or public relations disaster?

But it now looks like the plan may have been intended to achieve something else: to target those customers who settle their debts every month and so generate no income for the bank. Now some MPs are demanding an Office of Fair Trading investigation. Egg’s decision may have dramatically backfired. The Observer newspaper, who claim to have revealed how consumers with blameless credit ratings are being refused credit cards report that the practice is spreading.

They quote a number of people at Anger at Egg ban on prudent customers

• John McFall, chairman of the powerful Treasury Select Committee, said: ‘The motives of Egg need clear explanation if this a case of them ditching long-standing creditworthy customers because they make no money out of them.’

• Peter Thornton, a Liberal Democrat councillor in the Lake District, has been an Egg customer for over five years. He received a letter terminating his credit card on Friday. He said: ‘This is more than an amazing PR blunder. There’s a huge amount of people in my position. I’m on a lower interest rate because presumably they’ve assessed me as a good risk. Every business would benefit from losing 10 per cent of the least profitable customers, but the rest of us realise we can’t do that because it would be a PR disaster. They’re on the radio saying it’s just bad risk people they’re getting rid of. I feel slandered by that.’

The BBC carry comments from several more angry customers who express similar feelings at Egg customer anger at credit move. They also report that:

A spokesman for Egg 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.” He added: “The decision was taken after an extensive one-off review of our credit card book following acquisition by Citigroup. We can certainly understand the concerns, but even if people are up-to-date with repayments, they are people we decided we no longer wish to lend money to regardless of their status.”

Egg was bought last May by Citigroup for £575m, just before the ‘credit crunch’ gripped the world.