PAPER C

 

Committee :     RESOURCES SELECT COMMITTEE

 

Date :               20 NOVEMBER 2002

 

Title :               ISLE OF WIGHT CREDIT CARD

 

REPORT OF THE STRATEGIC DIRECTOR OF FINANCE AND INFORMATION AND COUNTY TREASURER

 

 

SUMMARY/PURPOSE

 

To advise the Committee on the operation of the Isle of Wight Credit Card.

 

CONTENT

 

1.         In July 1997 the Isle of Wight Council entered into a commercial agreement with the MBNA European Bank Ltd, for the promotion of an Isle of Wight Credit Card.

 

2.         The above agreement provides for the use in its promotional material of Isle of Wight Council Indicia, with such use requiring the prior approval of the Isle of Wight Council but which approval shall not unreasonably be withheld or delayed.  Promotional material has included the use of the Isle of Wight Council logo and a copy of the latest promotional distribution is attached to this report.

 

3.         The Council receives commission on the agreement with a flat rate fee for every new card issued, and also an ongoing commission on card usage.  Figures supplied by MBNA indicate that there are currently around 4500 holders of the Isle of Wight Credit Card.  The average card turnover is relatively low and perhaps indicates the holding of a memento or novelty, rather than significant ongoing financial usage.

 

4.         It has been necessary to write to MBNA regarding recent promotional activity.  Following a promotion earlier this year a large number of complaints were received from the recipients of associated material.  Many letters were concerned at the Council’s involvement in any such arrangement, with the perception that we were enabling MBNA to use the Council’s ‘officiality’ to promote the uptake of credit to vulnerable people.  This perception is furthered by the prominent use of the Council logo, a Council signatory to the document and the low profile of any reference to MBNA.

 

5.         A further problem with the recent promotion has arisen from the database(s) being used by MBNA.  It is important to note that the Council does not supply any information from its records to MBNA for use in mailing.  These lists are purchased by MBNA from companies trading in such material.  Following the latest mailshot several verbal complaints were made by distressed and often elderly relatives who had received material addressed to a deceased member of their family.

 

6.         Once complaints are received the Council is able to request the deletion of such names and addresses from the MBNA database, but on numerous occasions further mailshots have been received from the Company. Complaints have also led to significant amounts of time being spent on the phone and answering letters from persons concerned and agitated with the above events.  Letters of complaint have also been directed to the Island MP and the Chairman of the Council.

 

FINANCIAL IMPLICATIONS

 

Income from the Credit Card for the past two financial years has been:-

 

                                                                        £

                                    2000/01                       20,296

                                    2001/02                         6,887

                                                                        27,183

 

Commission for the first half of this financial year is £4,860.  The 2000/01 income figure arose from a large take up of new cards following a successful promotion campaign in the summer of 2000.  Sustaining such a level of new card accounts is of course unlikely to be successful over the longer term as a ‘saturation’ point is reached on prospective cardholders.

 

LEGAL IMPLICATIONS

 

The nature of the contractual agreement with MBNA has been examined by the Head of Legal Services and his detailed consideration of the contract, and the available options are detailed as Appendix A.

 

CONSULTATION

 

No direct consultation has been undertaken in the production of this report.  Feedback from the public arising from promotional material used in the operation of the current scheme have been considered in the writing of the report.

 

CRIME AND DISORDER

 

There are no direct crime and disorder issues arising from the production of this report.

 

OPTIONS

 

1.         To proceed with further promotion campaigns based on the present formats until such time as the present contract ends.

 

2.         To seek changes to the current promotional arrangements for the remainder of the current contract.

 

3.         Not to enter any further arrangement at the end of the current contract.

 

 

4.         To negotiate a new contract for commencement at the end of the existing arrangements.

 

5.         To negotiate an immediate end to the current arrangement and not enter into any further arrangements.

 

RECOMMENDATION

 

The Select Committee give its consideration as to the future operation of Isle of Wight Credit Card.

 

 

 

BACKGROUND PAPERS

 

MBNA Credit Card Affinity Agreement

MBNA Files

 

Contact Point : Gareth Hughes, Tel. 823604

 

 

JOHN PULSFORD

Strategic Director for Finance and Information and County Treasurer