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Cheques ban to hit profits at print company
PRINT group Communisis has warned that its profits will be hit by a proposed ban on unsolicited credit card cheques.
The Leeds based group said that irrespective of whether the Government's proposed ban becomes law, it expects its financial customers to change their behaviour and stop printing these cheques.
Under the proposals, credit card firms will no longer be able to send out credit card cheques to borrowers without them requesting them.
The cheques make up less than two per cent of Communisis' turnover – around 4.2m out of a group turnover of 257.7m last year – yet it is a high-margin business. Communisis said the impact on profits from the proposals is "likely to be material".
Communisis chief executive Steve Vaughan said: "We have already taken steps to reduce costs and mitigate the effects of this news and we will continue to pay close attention to our cost base as we move forward through the period."
He added that the group is confident about its long term prospects
"We continue to concentrate on building the diverse range of value added services we now have in our portfolio to ensure long term success," he said.
Yesterday the Government set out wide-ranging reforms for the credit card industry in a bid to reduce the number of people struggling with unsustainable debts.
The credit card blank cheques can be used like personal cheques. The value of the transaction is added to the borrower's card balance.
But the interest charged on the cheques is typically far higher than for a purchase made using a card, often 28 per cent rather than around 17 per cent.
Borrowers using the cheques also incur handling fees of 2 per cent of the value of the transaction, while there is no interest free period and consumers do not get the same level of protection on purchases as they would if they had used their card.
The Office of Fair Trading called for unsolicited cheques to be banned in 2006, when it warned that people were paying up to 57m a year extra in interest and charges by using the cheques, compared with if they had used their credit card.
The Government will publish an impact assessment on the ban of unsolicited credit card cheques this autumn, and will introduce legislation to ban them at the earliest opportunity.
The White Paper received a broad welcome from industry bodies and consumer groups.
Andrew Hagger, of Moneynet.co.uk, said: "Credit card cheques have wreaked havoc with the finances of unsuspecting credit card customers for years.
"One of the big problems has been that people who are under financial pressure have seen a credit card cheque as an easy way of boosting their bank balance and to buy themselves some breathing space, even if just for a couple of months.
"Unfortunately, they are merely delaying the inevitable and eventually run out of credit, and are then faced with a far larger pile of debt."
Paul Rodford, head of card payments at the UK Cards Association, said on the proposed ban on unsolicited credit card cheques: "We will co-operate fully with them whilst also attempting to avoid negatively impacting customers who may wish to continue using them in certain circumstances such as for balance transfers on promotional rates.
"In the past few years we have made lots of changes to help provide better transparency on our products and to make sure we uphold stringent lending practices."
Shares in Communisis fell nearly six per cent following the announcement, but rallied later in the day to close down nearly two per cent to 26p.
ros.snowdon@ypn.co.uk
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Sunday 12 February 2012
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