THIS TRANSCRIPT IS ISSUED ON THE UNDERSTANDING THAT IT IS TAKEN FROM A LIVE PROGRAMME AS IT WAS BROADCAST. THE NATURE OF LIVE BROADCASTING MEANS THAT NEITHER THE BBC NOR THE PARTICIPANTS IN THE PROGRAMME CAN GUARANTEE THE ACCURACY OF THE INFORMATION PRINTED HERE.

MONEY BOX

Presenter: Paul Lewis

TRANSMISSION 8th SEPT 2001 1200-1230 BBC RADIO 4

Market Conditions

Barclaycard Rewards

First-E Bank

Halifax Mortgages

JMC Duty Free

No Win/No Fee

LEWIS: Hello. In today's programme...

Barclaycard says free flights for loyal customers will be restored after a flood of complaints from Money Box listeners.

First-e, the internet bank is closed down, leaving 50,000 customers to find a new home for their money.

Britain's biggest mortgage lender, Halifax, may face a multi-million pound compensation bill

And the airline that admits you might have been double charged for your duty frees.

LEWIS: First, though, billions of pounds was wiped off the value of companies and pension funds this week. Stock markets in Europe and America fell consistently leaving the shares in our biggest hundred companies as low as they were in 1998. Late on Friday one major insurer responded to fears that there might be a dash for cash by imposing a tough penalty on investors who take their money out. Some Scottish Widows customers now face a 9% fine if they leave early. On the line is Michael Hughes, Chief Investment Officer of Baring Asset Management.

LEWIS: Michael what are the courses of this stock market decline?

HUGHES: Well the mood as you say has deteriorated because there is a sense that companies are going to suffer for longer and in particular sectors there is a fear that we may see some company failures

LEWIS: So there is further to go in this fall?

HUGHES: I think the bad news probably will continue for at a company level there were one or two lights at the end of the tunnel this week. We saw in the states new orders for twelve of the twenty biggest industries in the manufacturing sector improve. And the interest rates within both the US and UK markets have now moved to suggest that they are going to stay low for the next two years not a question of the next few months. So we have got the macro picture I think providing some degree of under pinning but the fear is that we will actually see more pressure on individually companies.

LEWIS: And what should individual investors do? Should they take their money out of the stock market- going for this dash for cash - putting it in a savings account ?

HUGHES: Well I think that whenever the news seems bad is normally the time that you should be looking at opportunities within the market. I don't think this is a time to rush back in, I don't think the market is particularly cheap but as the news which I think will deteriorate over the next few weeks comes to the headlines it may be the time to be actually putting money on a gradual basis back into the stock market.

LEWIS: So people should still think of paying money regularly into pensions or ISA's not putting it into a savings account- they should be dripping the money in - in the hopes that it will get better.

HUGHES: I think that's right, remember though that the indexes do seem to be hit hard this summer , but individual stocks have in some cases reached their all time record high, so it's not all bad news.

LEWIS: And in a word which sectors would you be putting money into if you were being selective?

HUGHES: I think anything but the Telecom sectors at the moment because they're the ones who have the worse problems.

LEWIS: Michael Hughes from Baring Assets Management, thanks for talking to us.

LEWIS: Now Britain's biggest credit card company, Barclaycard, has given in to pressure from customers over plans to abandon the free flights and wine for loyal customers. The U-turn came just five days after Money Box reported how angry some customers were that free flights and other gifts were being scrapped in the reward scheme and replaced with discounts on CDs and consumer goods. The company said the changes followed extensive research among its customers. But this week even more customers who only learned about the changes through our report last week quickly joined the clamour of criticism.

MAN: I've got about 8,300 rewards points and I was looking forward to a flight for two to Spain sometime soon, I think they've been under hand, if they were going to change the whole structure they should have warned us off.

WOMAN: I'm absolutely livid that they didn't let card holders know , they're obviously relying on the small print in the booklet. I really feel that's its almost theft by the backdoor.

MAN: I had 9,700 points, which means I spent �97,000 and not to be allowed to take a couple of flights at the end of all that time is a cheek. They have tried to sweep a problem under the carpet they've not been open with loyal customers and they've not been loyal in return.

LEWIS: Well many people like that customer who contacted us had spent around �100,000 on their card, but the prize went to Alan who e-mailed us to say he had spent more than a quarter of a million pounds to earn the 26,000 points he needed for flights to Australia - but now he was grounded

ALAN: Ironically I just this month reached that total when I heard on Money Box last Saturday that the scheme's being cancelled . I don't recall receiving any warning whatsoever about this and that's what really annoys me that it would have been easy enough for Barclaycard to highlight that the scheme was being changed.

LEWIS: Well, people like Alan will be able to fly to Australia courtesy of Barclaycard Rewards as long as they get their application in quickly. The company has relented but only for six months and the only free offers in the new catalogue will be flights and wine. I asked Peter Crook, Managing Director of Barclaycard UK, why such a grudging change of heart.

CROOK: Well as a responsible and successful business we always listen to our customers and react to what they tell us and its clear that some customers were disappointed with our new programme so we've responded to that and were giving them some of the things that they want.

LEWIS: So what kind of response did you get at Barclaycard?

CROOK: Well we had some calls and some letters, you know not a large number of calls and letters relative to our overall business, but clearly a number of customers were disappointed and we listen to our customers.

LEWIS: Are you going to apologise to those people you've upset?

CROOK: We're sorry that some of them were disappointed and clearly we're now listening to what they want and reacting to their needs and we're introducing some of the more popular offers back into our October programme.

LEWIS: So how long will this offer last - the restoration of the flights and the wine?

CROOK: Well the new programme we're bringing out will last for six months until the end of March and there will be another catalogue after that time, it's far too early to say what's in that catalogue .

LEWIS: So you're not - you can't tell us how long this offer will last because people haven't said to us we want this offer to be extended six months , they've said to us we want flights, wine, the free gifts that's what we want from Rewards. We don't want small discounts off consumer goods we may not even want to buy in the first place.

CROOK: Our research says that customers want rewards they can achieve relatively quickly, the flights and wine will remain in the catalogue for at least six months then after that time we will continue to listen to our customers and give them the offers they want accordingly.

LEWIS: But you won't tell me that that will last more than six months

CROOK: Well I don't really know what will be in the April catalogue at the moment I'd be second guessing that.

LEWIS: These are high spending customers aren't they, the very people you want to keep one listener must have spent over a quarter of a million pounds on his card earning you tens of thousands of pounds in commission from retailers- they are not people to upset, are they?

CROOK: Our average customer spends around three thousand pounds a year on their card and earns around 300 points so the majority of our customers would like a set of offers that they can achieve more quickly.

LEWIS: Customers also can't have helped noticing can they that you've just signed a three year deal with the football premiership it's costing forty eight million pounds, some of them may well feel that you have been cutting back on their offers to pay for this promotion.

CROOK: No not at all I mean it's down to customer research which has indicated that the majority of our card holders want smaller offers which don't involve collecting huge number of points. And as I have already said the response from customers since the alterations were made has shown us that some customers were disappointed with that and we have now changed our position.

LEWIS: Peter Crook of Barclaycard. Trying to steal the title of the listening bank. And waiting to hear no doubt from Money Box listeners about what they want.

LEWIS: Well after less than two years in business the UK's first internet bank, First- e, has become the first to close. First e's owners, the French Banque d'Escompte, are pulling the plug leaving tens of thousands of customers with less than a month to move their money out and arrange for their banking to done elsewhere. Money Box's Chris A'Court has more details about how the shut down will work...Chris...?

A'COURT: Yes this has left all those First-e customers who were really pioneers in taking up Internet Banking in a difficult spot. It means that they urgently need to arrange another current account and should have already stopped writing cheques. They only have a fortnight left for getting cash out of hole in the wall machines before the First-e card won't work and on the last day of this month everything stops. So, for example, your salary credit won't be accepted and any direct debit or standing orders on your first E account won't be paid out.

LEWIS: Well First e has arranged that its customers can transfer the money currently in their account into a share trading account with SelfTrade UK -hardly a suitable alternative to a current account. Alain Wormser is Chairman of Banque Escompte, and he's decided to close down First E. When I spoke to him he blamed the failure on too few customers, poor administrative systems, and an unsustainable level of interest. But he says customers don't necessarily have to turn away from Net banking...

WORMSER: For those customers who were interested to continue using that media they are other institutions and they can offer a good service and better than ours.

LEWIS: But people who may be sick, maybe on holiday for the next three or four weeks they come back they'll log onto the Internet they won't be able to get access to their bank , they will have to speak to somebody in a Paris bank in order to recover their money.

WORMSER: Right

LEWIS: If people do nothing and the money stays in your bank - will it be earning interest there?

WORMSER: No

LEWIS: Well not much entente cordiale from Monsieur Wormer. However, since that interview was recorded, some hope has emerged for first-e's customers. A deal has been done with Abbey National's internet bank, cahoot. And with me is Tim Sawyer who's cahoots marketing director and has been negotiating the deal.

LEWIS: Tim what will you be doing?

SAWYER: Good afternoon. In the time available there is a limited amount that we can do what we're hoping to do next week is to work with SelfTrade and add a click through from the First e web site to ourselves and e-mail customers saying if they want to apply have a direct link to us so they can apply quickly and easily to us.

LEWIS: So this is applying for a cahoot current account instead of a First e account - but why aren't you just taking the whole lot over and not making people re-apply?

SAWYER: I think in the time available there will be legal issues and the ability to do it quickly would prevent us doing so, we wouldn't want to take people's accounts without their active approval and this is a good way of making sure that they do want a cahoot account rather than feel they've been forced into it.

LEWIS: So it won't be automatic they'll click on the web site or on the e-mail if they choose - Where will that take them?

SAWYER: That will take them to cahoot and the application pages where they'll be a short application form to apply either for a current account or any of the other services such as credit cards that we offer.

LEWIS: And will you be doing extra credit checks - will it be a different system from the one that applies for First -e ?

SAWYER: It will be different because First e do not offer any borrowing facilities we lend at 8% and therefore we have to take a degree of care as to who we lend to and also we will want to do full money laundering checks ourselves to abide by Consumer regulations.

LEWIS: Now one reason Monsieur Wormser gave me for closing down First e was that the interest rate they paid for four/four and a half % was too high given all the costs given the relatively small customer base- - cahoot pays now up to 6% on a current account - how long can you continue to do that ?

SAWYER: We obviously look at our rates the whole time certainly for the foreseeable future we will be the market leader the difference between us and First - e is that we're part of the Abby National Group and therefore we have economy as a scale and the ability to use the money that they do not have.

LEWIS: And someone to pick up the losses. Is there a danger that you'll attract customers in and then in a year or two you'll abandon them - like First- e has?

SAWYER: As part of the Abbey National Group I don't think that will be conceivable that we would do that thing.

LEWIS: Tim Sawyer- thanks very much for talking to us.

LEWIS: Now Halifax, Britain's biggest mortgage lender, could face a bill running into millions of pounds after a ruling by the Financial Ombudsman that it had treated thousands of customers unfairly earlier this year. In February Halifax cut its mortgage rate by three quarters of one percent. The new rate applied to many of its existing customers. But not all. Those who had a fixed or capped interest rate were told they wouldn't get the advantage of the new lower rate until their existing deal came to an end. Many customers thought this was unfair. And one, Chris Wright, complained. This week the Financial Ombudsman ruled in his favour - and that could open the door for hundreds of thousands of customers to get compensation. Chris Wright...

WRIGHT: It seemed to me that the bank were trying to get around their obligations to customers like me by inventing this concept of two variable rates.

LEWIS: And what did Halifax say when you raised this with them?

WRIGHT: Well that they were entitled to introduce this concept of a different rate. I think it's long been a source of annoyance to many borrowers that banks and building societies almost uniquely have the habit of treating their existing loyal customers worse than they do new borrowers but this seemed to be an extra twist on that.

LEWIS: Halifax would not come on Money Box but they did give us this statement.

WOMAN: This is only a preliminary finding by the Ombudsman we believe we are acting in the best interest of our mortgage customers and have been open and fair in our dealings with them. We are in the process of formulating our appeal and it would be premature to comment further at this stage.

LEWIS: But that didn't impress Chris Wright.

WRIGHT: You know Halifax can take this to appeal and if they wriggle off the hook on some legal technicality which they might - yes they may win the legal battle. I wonder though whether they'll win the customer war ?

LEWIS: What do you think Halifax should do?

WRIGHT: Well I think they should honour the recommendation that's been made by the Ombudsman, he's after all an impartial adjudicator he's had the facts and the evidence from both sides and his ruling was clearly that the complaint we made was a legitimate one.

LEWIS: Chris Wright. Well with me is Paula John from Your Mortgage who's been following this story...

LEWIS: Paula do you think Halifax will loose ?

JOHN: I sincerely hope not �..

LEWIS: Hope not..??

JOHN: I hope not. We're a consumer title we always champion the consumer but I have to say in this instance I have to sympathise with Halifax. What they have tried to do is to reward the vast majority of their existing borrowers by bringing down, by introducing, this new variable rate. And what Mr Wright is saying, he's on a capped rate, that means that he took this rate out two years ago capped at 7.25%, which meant that the rate he pays over the next three years, it was a five year deal, will never go above that rate but if interest rates should move down as they have the rate he pays should track them downwards. Now he's had the benefit of that - that capped rate for the last two years and he's trying to change the contract half way through.

LEWIS: But this isn't what the adjudicator said is it. The adjudicator has done all the work it is quite rare that the initial decision is overturned later. What they're saying is by introducing two rates it made the contract he signed ambiguous and that has to be decided in his favour because it was Halifax's contract.

JOHN: Well there is this thing about ambiguity of language but the problem is - you mentioned people on fixed rates also don't get to benefit from this lower rate, people on fixed rates are quite happy because they know exactly what they are going to be paying for the fixed rate period in any case. And for those people who have taken out fixed rates if they take one out for five years what it will say in their contract is that after five years you will revert to our base rate. Nobody can tell a lender, nobody can tell a borrower what a base rate is going to be in five years time. Nobody knows what's going to happen to interest rate so there's ambiguity, it really is inherent in mortgage contracts.

LEWIS: Well obviously if Halifax wins then there is nothing much more to say for people. If they do loose against what you expect or what you hope what will people have to do to get the compensation ?

JOHN: To actually get compensation you have to go to your lender first - you have to go through their internal complaints procedure and then it will be passed on to the Ombudsman. So if they do find in Mr Wright's case - if you think you have a case go to your lender first don't go straight to the Ombudsman cause they won't listen.

LEWIS; O.K. and we will be reporting on what does happen on Money Box of course. Paula John from Your Mortgage thanks for talking to us.

LEWIS : Now a word of warning this week if you're one of the millions of people who've been on a holiday this year using a JMC flight. Some passengers who bought duty free goods on board have been charged twice but might not realise it. Chris A'Court has been investigating, Chris.....

A'COURT: Yes Money Box can reveal how you could have paid more than you bargained for thanks to listener Alex Wright who spotted that he'd been charged twice for the duty frees he bought on a JMC trip to the West Indies. He didn't sense anything was wrong when his credit card was swiped in front of him on board the plane but he took off in a different sense when his card statement arrived several weeks later..

WRIGHT: I did check the statement for once and I had these two entries for the same amount but on different days but both had JMC initials next to them so I realised that they must have stemmed from the same flight and that there probably for the same item. So I was obviously a little angry that I felt it's almost like being like a victim of a pickpocket and if you get the opportunity to notice the guy who's picked your pocket then maybe they'll give you your money back.

A'COURT: Now when Alex queried the overcharging with JMC he learned that it wasn't just a one-off --- because there is systems error in the equipment JMC uses to take payments on board its planes...

WRIGHT: The second lady I spoke to on the phone obviously knew about the problem and she said I was lucky only to be charged twice as a lot of people were charged two or three times for the same purchase and that it was obviously a problem they knew about for some time.

A'COURT: JMC now says that following Alex and ourselves highlighting the problem they'll speed up the replacement of all credit card payment equipment on all thirty three of their aircraft, it should be in by the end of this month.

LEWIS: That's a relief Chris , but how many people might have been double charged like Alex?

A'COURT: Well JMC carries about seven million passengers a year and believes the number affected is small. It has though already spotted a couple of dozen similar cases of double charging and is repaying the customers, Alex now has his refund. But JMC can't be sure they've identified all instances and so everyone who bought duty frees on their planes should check their card bills. JMC spokesman is Shaun Robinson....

ROBINSON: There may well be further incidences and if those come to light following the programme we will investigate those with the customer and with the card issuer and no stone will be left unturned. And if there has been an occasion where there has been a further double charge all monies will be refunded. And if the customer has incurred any interest by their card company obviously we will look to put that right as well.

LEWIS: Shaun Robinson of JMC. Giving a whole new meaning to duty free whisky - make mine a double. Other people who do spot a double, or perhaps triple charge, can contact JMC's 'Post Flight Department' - details with the helpline and on our website.

(TV Advertisement)

LEWIS: Well if you listen to cable or satellite television you can't miss adverts like that, encouraging us to claim compensation if we have an accident that we think is someone else's fault. In April last year, the Government introduced new rules which were supposed to ensure that anyone could sue for personal injury, safe in the knowledge that, win or lose, they wouldn't have to pay. Eighteen months on, the courts are still arguing about exactly how the scheme will work. And the reputation of some of the claims management companies that do those adverts is low after accusations that some people saw most of their compensation disappear in fees and charges. Well with me is Patrick Allen a Senior Partner at Hodge, Jones and Allen and Vice-president of the Association of Personal Injury lawyers. Patrick tell us first how this system should work ?

ALLEN: Well the government abolished legal aid for personal injury cases in April 2000, and it intended that the no win/ no fee system should largely replace the funding and it was part of their policy that the success fee charged by the lawyer and the cost of an insurance policy to pay for the other side's costs if the case was lost would be paid by the defendant and that means the defendant's insurers. Unfortunately the defendant insurers haven't played ball and over the last eighteen months they've been obstructive and have largely refused to pay the success fees and the insurance premium raising a lot of technical arguments.

LEWIS. OK Now the success fee is the extra money you get if you win the case that compensates you for the risk of loosing and getting paid nothing - cause if you loose you don't get paid at all.

ALLEN: The solicitor takes the case on the basis that he'll be paid nothing if he loses but will get an additional fee if he wins and that's now supposed to be paid by the defendants.

LEWIS: And there's also an insurance policy because of course if you do lose although your lawyer doesn't charge you the other side is going to whack in all their charges.

ALLEN: That's right, there's an insurance policy which costs maybe three or four hundred pounds to cover the other side's costs .

LEWIS: So does it work now or not?

ALLEN: It's not working and as a result of the defendant insurers not paying about a hundred thousand claims for innocent victims are being held up in the system and they're awaiting the outcome of a test case which in fact came to the court in July called Calorie and Grey and the Court of Appeal made their ruling and we feel the decision was very sensible and they've ordered that a modest premium can be recovered and a success fee can be recovered but unfortunately the defendants haven't accepted the ruling and have now lodged an appeal with the House of Lords.

LEWIS: So that is still going on - well also with me is Simon Ware- Lane he's just taken over one of the most controversial claims management companies, Claims Direct, and merged it with his own smaller company, Claim Line...Simon what's you're experience of how this is working ?

WARE-LANE: Well at the moment it clearly isn't working. I agree absolutely with Patrick the defendant insurance industry have lost in court on a number of occasions they're going to appeal on a matter of some three hundred and fifty pounds and we believe just simply to hold up the process that the government have said is the way they see forward for personal injury cases.

LEWIS: So you both blame the insurance companies. But why do we need claims management companies like Claims Direct like Claim Line when I can ring up someone like Patrick if I break my ankle in a supermarket and he will deal with my case without you ?

WARE-LANE: Well the basis of what we are trying to do is ensure that people have access to justice based on the merits of their case not on their ability to pay and by having a claims management company involved we believe we can provide them with professionals that you need. You need a range of professionals to manage your case of which members of Patrick's organisation are one.

LEWIS: But why is it better to have another layer involved - if I go direct to Patrick or a company like his, they take the case. If I go to you, you then have to employ the lawyers so there's another group of people who have to be paid in the middle.

WARNE-LANE: Except that Patrick's contingency fee arrangements charge a weighted higher fee to cover their risk of the loosing cases. I believe you should receive your compensation in full and the professionals should receive the fees they deserve for running your case. - not reckless profiteering at the most vulnerable member of the community someone who's been injured through no fault of their own.

LEWIS: I'm not quite sure if you're being accused of reckless profiteering Patrick

WARNE-LANE: Not at all

LEWIS: But do you think claims management companies are about ��

WARNE LANE: I'm absolutely with Patrick on this - the defendant insurers are the people that need to be brought to book here.

LEWIS: Right but Patrick are claims management companies a good idea - or should we go straight to lawyers ?

ALLEN: Well the main point is that the victims of accidents should be represented by the highest level of expertise and in our view that means a solicitor, a solicitor experienced in personal injury at work. Now solicitors are regulated by the Law Society as for their conduct and training and qualifications. And victims of accidents should try to find a solicitor - preferably a local solicitor so that they can meet them face to face. And find someone for example a member of the law society personal injury panel.

LEWIS: But if you Simon If someone comes to you - you do find them a lawyer you don't handle it yourself

WARNE LANE: No that's right - but we find the whole process of insuring the claim is settled from start to finish.

LEWIS: OK thank you very much for talking to us that's Simon Warren Lane from Claims Direct, Claim Line and Patrick Allen from Hog, Jones and Allen. And that's all we have time for today. If you would like more information about any of the items on today's programme, you can call the BBC Action Line on 0800 044 044. Calls are free on 0800 044 044. You can look at our Webster - www.bbc.co.uk/moneybox. On Monday Vincent Duggleby is here with our phone-in Money Box Live on Tax Planning - offering expert advice in getting your tax affairs in good order. I'm back with Money Box at the same time next week . Today the producer was Chris A'Court and I'm Paul Lewis.