Marks makes sparks

By RICHARD DYSON
Updated:

 

THE financial arm of Marks & Spencer has become the first major company to break the Banking Code, the voluntary rulebook agreed by the banking and credit card industry.

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M&S Money, which is poised to launch its '&more' credit card business in the next fortnight, has ignored the rule that forbids lenders from sending cards to people who have not asked for them.

Within days, M&S will post its new MasterCard to 2.6m people. In all but a handful of cases, the recipients will not have requested the cards. Instead, they will be targeted because they are on the company's database of five million store card customers.

The move, seen by rivals as unprecedented and extremely aggressive, will at a stroke transform M&S into Britain's sixth-biggest credit card company.

Up to £4bn of fresh credit will be offered to consumers who have not asked for it.

The Banking Code has been drawn up and modified over several years to promote good practice and fairness to consumers. The code clearly states: 'We will send you a card only if you ask for one or to replace a card you already have.'

M&S's card launch is being overseen by Laurel Powers-Freeling, formerly of Lloyds TSB and now chief executive of M&S Money.

She says the new &more cards are simply 'replacements' or 'upgrades' for existing store cards. But in practice, the cards are completely different - store cards can be used only in M&S shops and typically impose low spending limits.

The new cards can be used anywhere and the average spending limits are likely to be at least doubled, according to M&S.

The code is enforced by the Banking Code's Standard Board (BCSB), which is now in an embarrassing position. In private, it has expressed concern at M&S's tactic. But publicly, it is allowing M&S to wriggle off the hook because the code is not set to apply officially to M&S until next summer.

BCSB chief executive Seymour Fortescue says: 'M&S is still in the process of applying to subscribe to the code, so we don't yet have official jurisdiction over its activities. Only when it is fully covered can we force it to comply.'

M&S's move, coming as card issuers face increased scrutiny from MPs on the powerful Treasury Select Committee, has also plunged the High Street giant into political hot water. Vince Cable MP, the Liberal Democrat industry spokesman, has called for all uninvited offers of credit to be outlawed.

Of M&S's card launch, he says: 'It is unsolicited debt promotion by any other name, whatever the company says. It's very dangerous.'

And he warned: 'If and when the current economic bubble bursts, a lot of people will find themselves in difficulties. M&S will have a direct responsibility.'

An M&S spokesman said: 'We are offering existing customers an improved service. We are not sending cards to people with whom we have no relationship. Our credit limits are extremely prudent. We can say, hand on heart, that we are a responsible lender.'

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