Credit Card Overview
Fact: there are more credit cards than people in Britain and the country's debt problems are amongst the worst in the world.
When choosing a card provider, its policies on responsible lending and debt advice provision are of key importance. The green and ethical concerns you bring to who you bank with, concerns about equal opportunities or the environment, are just as applicable to who you get your credit card from.
This section also looks at the green or ethical worth, as well as the practicalities of charity affinity cards.
Does your credit card provider treat its customers responsibly?
What are charity affinity cards and how do they work?
Does your credit card provider treat its customers responsibly?
Responsible lending
According to the British Banker's Association (BBA), responsible lending means 'providing credit, based on background checks and professional judgement, to people who can accommodate repayments without getting into financial difficulty'. As the sheer number of people in debt today shows, these principles are not always well applied by credit lending institutions. In 2008 our credit card debt hit £54.4bn and continues to rise.
Transparency is key - credit card customers should be presented with the terms and conditions attached to their card up front and in plain English. It is important to check whether your provider has a responsible lending policy in place, and how it is implemented if it does exist.
Debt management
Credit card debt is all too common in the UK. Some financial institutions offer basic in-house debt advice services, the scope of which can vary greatly. Often providers will refer customers to free advice services including the Consumer Credit Counselling Service, the Citizens Advice Bureau and others.
Use our search tool to find details of your provider's debt management services. Information on this subject can be found under 'Responsibility toward Customers'. Alternatively contact your provider directly for further information.
What are charity affinity cards and how do they work?
Affinity card providers make a small donation on behalf of the card holder to the charity it is associated with.
Such charity donations average around 25p per £100 spent. So, in order to donate £100 to your charity of choice you'd have to spend £40,000 with the card. Most providers also make a one-off donation of between £5 and £25 on each new card account.
In their analysis of charity affinity cards moneysavingexpert.com suggest that a more effective way to donate money is to use cash back cards. Cash back cards operate in much the same way as affinity cards except that instead of a charity, additional money goes to the card holder and this money is usually considerably more than a standard charity card donation. The cash back card holder can then donate the money they have earned to the charity of their choice and if eligible, Gift Aid it, so rather than £1 the charity will receive £1.28. Donations on affinity cards are not eligible for Gift Aid.
View the range of charity affinity cards available on the market click here.
Your next steps
See our guide Next Steps - Credit Cards for more suggestions on how to find out about your credit card provider's green and ethical policies, how to contact them and how to find the right credit card for you.
Credit Card Search
Credit Card Provider
Lloyds TSB
Green/Ethical Products
- Basic Bank Account
- Islamic Financial Services
- Community finance
- Socially Responsible Investment Funds (through Scottish Windows)
Ethical Lending or Insurance
No evidence was found of an ethical lending policy.
Responsible Lending
1. Credit Lending
All Lloyds TSB branded mortgages are administered by partner bank Cheltenham & Gloucester (C&G). Lloyds TSB/C&G offers LTV (loan-to-value) rates up to 90%, matching the suggestions of the FSA’s Turner Review that borrowers should have at least a 10% deposit for a mortgage.
Lloyds also offers a ‘Lend a Hand’ mortgage for first time buyers with an LTV of 95%.
The bank does not publish its LTI (loan-to-income) rates, however, for which the Review suggests lending 3.5 times the annual wage of a single applicant.
The bank states that it uses credit reference agencies in all cases to make lending decisions for mortgages, personal loans, credit cards and overdrafts and that it will also use an internal check where there is an existing relationship with the customer.
There is no policy to avoid or prevent offering unsolicited increases in credit limits to customers. The bank states that customers can request limit decreases or that no further increases are given.
2. Debt Warning
The bank has a statement that ‘borrowing sensibly’ will help preserve a good credit rating. It also runs a generic repossession warning for mortgage customers.
Additionally the bank’s pre-contract agreement for personal loans carries the following warning: ‘Missing payments could have severe consequences and make obtaining credit more difficult’. It also outlines the rights of both borrower and lender under the Consumer Credit Act (1974).
The bank provides a link to the FSA’s Money Made Clear website in its section on debt advice, though does not explicitly link to the FSA’s Debt Test tool or an equivalent.
However, the C&G ‘Am I Eligible?’ page provides tools for customers to calculate their borrowing and repayment amounts and terms which carries a generic repossession warning at the end.
3. Debt Management and Advice
With regard to secured loans (mortgages) the bank recommends that customers seek free debt advice and provides links to organisations and websites including Consumer Direct, Citizens Advice Bureau, the FSA’s Money Made Clear website and the National Debtline.
The bank also states that it will:
- Allow customers a ‘reasonable period of time’ to pay back their debt
- Talk to an agency which gives debt advice, for example the Citizens Advice Bureau, if the customer requests it
- Offer to send a debt counsellor to discuss the customer’s financial circumstances and add the fee for same to the mortgage account
- Attempt to arrange a new payment plan
- Offer to change the method the customer makes their payments by or the date they make them
- Consider extending the mortgage time period, thus reducing monthly payments
- Consider a change in mortgage type to reduce monthly repayments
Further to this the bank outlines the steps leading up to repossession of property/court action.
Short, free-of-charge payment holidays are offered to customers who have made regular overpayments. Those who have not been overpaying may still be eligible for a break but will incur a charge and must have already made 12 monthly payments.
With regard to unsecured loans the bank outlines ‘steps to take to pay off debt’. Amongst these steps is a reference to the bank’s ‘Debt Remedy Tool’ which provides customers with an assessment of their circumstances and access to expert advice, anonymous and free of charge. Financial ‘Health Checks’ are offered to existing customers at branch level.
The bank states that if it repossesses a customer’s home it will give them advice about getting in touch with their local authority to find somewhere else to live. No evidence was found that the bank engages with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with the customer or on the customer’s behalf.
Financial Exclusion
The bank offers a basic account to low-income customers.
A number of Lloyds TSB ATMs have been made accessible to disabled customers. The bank has also partnered with the Post Office to allow Lloyds TSB’s personal customers access banking services at around 14,500 post offices. Hearing induction loops are available within all branches while British Sign Language (BSL) interpreters can be called upon for extra assistance in some cases. Typetalk is also available.
Lloyds TSB has been involved in microfinance projects on both a commercial and semi-commercial basis, providing capital for loan funds which are on-loaned to business start-ups, micro-businesses and social enterprises.
The bank's Public and Community Sector team within Corporate Banking states that it is one of the largest funders of the social housing sector in the UK with £6bn committed in 2007. The bank also works in partnership with community-based organisations in the SME sector.
However, no evidence was found of partnerships with credit unions or similar organisations.
Environment
The bank’s environment policy addresses the issue of energy efficiency and waste management. It is also subject to continuous assessment under which targets and achievements will be monitored.
Carbon Neutral
The bank states its goal is to reduce its operational carbon emissions by 30% by 2012 but no pledge for total neutrality was found.
Equal Opportunities
The banks equality policy addresses the key issues of gender, race, disability and sexuality.
Women on the Board
14.28% of board members are women (2007).
Voluntary Standards & Initiatives
Lloyds TSB is a signatory/member of a number of charters and initiatives including:
Charitable Giving
An average of 1% of pre-tax profits was donated to charity over three years (ending 2007).
Lloyds TSB
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Pet)
- Student Current Account
- Student Credit Card
- Student Contents Insurance
