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Zero Interest Credit Cards on Balance Transfers

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					CREATION FINANCIAL             SERVICES       LIMITED     (“CREATION”):           INITIAL
SUBMISSION

Full text with excisions

22 April 2004

CONTENTS

1. Company Background

2. The Market

3. Supplier/Retailer Relationships

4. Barriers to Entry and Ease of Switching

5. Products and Pricing

6. Information Available to Consumers

7. Creation’s Capital Structure and Financing

8. Additional Information

9. Summary

Appendix 1: Creation’s History, Organisation and Financial Structure

Appendix 2: Example of a Summary Box

The Company

1.1    Details of Creation’s history, organisation and financial structure are given in
       Appendix 1.

1.2    Creation operates solely in the UK, though its affiliates operate in other EU
       member states (see Appendix 1).

1.3    The principal activities of Creation are the provision and operation of:

       1.3.1    store cards, i.e. running-account credit cards which enable
                customers (i.e. cardholders) to make purchases from relevant
                retailers up to a credit limit (usually £[   ]) and then repay all or
                part of the balance on the card account each month;

       1.3.2    personal loans, either as fixed-sum or running-account credit; and

       1.3.3    various additional products or services for customers, including:
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                 (a)     cash advances on store cards (including foreign exchange);

                 (b)     CPP (Cardholder Protection Plan) card protection insurance
                         against loss or theft of cards;

                 (c)     payment protection insurance (“PPI”) which (i) insures
                         monthly payments in relation to the card if the customer
                         becomes unemployed, ill or dies; (ii) provides cover against
                         loss or theft of or damage to goods purchased using the
                         store card; and (iii) provides price protection i.e. if the
                         purchase price of a product is reduced within 60 days of
                         purchase, the customer can reclaim the difference (less an
                         excess of £5); and

                 (d)     travel insurance.

2        The Market

2.1      Creation operates within the UK consumer credit market. Consumers have
         a wide choice of where to shop and how to pay for their purchases.
         Creation’s products are among many options available to consumers in
         relation to payment.

2.2      Consumers can pay for retail purchases by a plethora of means, including:

         •     cash;

         •     cheque;

         •     debit cards;

         •     credit cards (i.e. a Visa card or MasterCard);

         •     charge cards (i.e. American Express or Diners Club);

         •     store cards;

         •     fixed-term credit offers; and

         •     for certain purchases (e.g. mail order) in instalments.

2.3      Consumers can borrow money from a wide variety of lenders and by a wide
         variety of methods, including:

         •     bank overdrafts;

         •     secured or unsecured personal loans; and

         •     cash advances on credit cards or store cards.

         An increasing number and range of organisations now offer personal loans,
         e.g. The Post Office.
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2.4      There is increasing overlap between credit products as various retailers
         (such as Tesco and Sainsbury’s) have chosen to offer co-branded versions
         of Visa or MasterCard credit cards and others (such as Marks & Spencer
         and GE Consumer Finance) have chosen to convert their store cards into
         co-branded versions of Visa or MasterCard credit cards, or, as in the case of
         John Lewis, to invite holders of store cards to apply for new co-branded
         credit cards.

2.5      Credit cards frequently offer zero or low interest on balance transfers,
         including transfers from store cards; these credit card companies compete
         directly for business with store cards.

2.6      These factors demonstrate that it is not appropriate to regard store cards in
         isolation as a distinct and separate market.

2.7      Creation considers that the UK has a more competitive consumer credit
         market than other EU member states, with greater provision of credit from
         more lenders, offering more products. One relevant factor is the availability
         in the UK of credit reference information from bureaux (such as Experian
         and Equifax) which are independent of lenders, which allows entry into the
         market. Creation understands that this is not the case in, for example,
         France.

2.8      The Competition Commission’s Report on the merger of March UK Ltd and
         the home shopping and home delivery businesses of GUS Plc (January
         2004) referred at paragraph 4.91 to evidence from Professor Kempson of
         the Personal Finance Research Centre that there was a significant increase
         in the penetration of credit facilities and credit cards in particular within Great
         Britain from 1997 until 2002. The average number of credit facilities per
         person used in Great Britain was 2.0 in 1989 and had grown to 3.1 by 2002.
         Paragraph 6.114 of the report states that according to NOP: (a) in 1997,
         38% of the population had credit cards; by 2002, 48% of the population had
         credit cards; (b) in 1997, 30 per cent of the population had overdrafts and
         14% had personal loans; by 2002, 51% of the population had overdrafts and
         19% had personal loans.

2.9      The OFT’s March 2004 Report on store cards (the “OFT Report”) recognised
         that store cards represent approx 2.5% of the total consumer credit market.
         This figure would indicate that in general the consumer has (and is aware of)
         a high degree of choice in the means by which they can access credit.

2.10     Creation considers that the key selling point to consumers of store cards is
         the benefits offered to cardholders, in particular, discounts on first purchase
         and subsequent cardholder benefits. The importance of the first purchase
         discount is demonstrated by the fact that             [        ]% of Creation’s
         cardholders are “single spenders”, who will take advantage of the opening
         discount (typically 10 or 20% off their first purchase) and then pay off the
         balance in full or over [     ], but will not make any further purchases on the
         store card. The average first purchase value on a Creation store card is £[
              ]. This indicates that for many consumers, the key price element in the
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         transaction is the sale price of the relevant product, not the interest rate on
         the store card.

2.11     The UK consumer credit market is highly regulated, with detailed regulation
         covering many aspects of lenders’ business, including:

         •       licensing;

         •       the form and content of agreements;

         •       advertising;

         •       cancellation rights;

         •       rights of consumers and termination; and

         •       frequency and content of statements.

         In addition to the statutory framework, there are additional codes such as the
         Banking Code and the requirements of the Finance and Leasing
         Association.

3        Supplier/Retailer Relationships

3.1      Retailers’ Objectives and Approach

         3.1.1     Retailers who operate store card programmes have two key
                   objectives. The prime objective is the ability to communicate with,
                   and reward their customers, through loyalty programmes and/or
                   special offers. The secondary objective is the provision of point-of-
                   sale credit facilities for their customers. (Examples of opening offers
                   and loyalty schemes were provided).

         3.1.2     Historically, store cards were introduced because retailers found that
                   the offer of customer accounts/credit in addition to increasing sales
                   engendered considerable customer loyalty. Retailers wished to
                   enhance the loyalty of their customers by building up a “club”
                   concept through additional benefits – discounts, special events,
                   targeted vouchers, loyalty points, etc., and enhanced customer
                   service.

         3.1.3     Initially, many retailers operated store card programmes in-house.
                   However, many of those providers did not operate these businesses
                   as stand alone units and quite often there was no clearly defined
                   business unit with a true allocation of business costs. Any income
                   generated by these businesses, therefore, was often taken into the
                   retailers profit and loss account with costs being absorbed by the
                   retailer. Retailers often funded these activities out of surplus cash
                   rather than borrowing from the commercial market. As a result, there
                   was little relationship between the general credit market and the
                   associated dynamics and pricing of these products.
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         3.1.4   Whilst initially store cards may have provided credit facilities to those
                 not eligible for credit cards, this has changed over recent years with
                 the much higher penetration of credit cards (see paragraph 2.8
                 above). The number of store cards in issue has none the less
                 remained high as they offer a much wider range of benefits and
                 service than credit cards. Store cards are as much a loyalty card as
                 a line of credit and enable the retailer to maintain communication
                 with its customer base and target specific offers at customers likely
                 to be interested.

         3.1.5   As balances became higher and the business became more
                 complex, many retailers decided to outsource the provision of this
                 credit (with suitable safeguards for their customer base) to outside
                 providers in order to free up the capital employed and management
                 time for their core businesses. While a few retailers have moved
                 against this trend (for example GUS) generally retailers are moving
                 out of the direct provision of credit and outsourcing to third parties.

         3.1.6   Retailers nonetheless bind the store card issuers to maintain the
                 additional customer benefits previously provided by the store and
                 generally contribute towards marketing spend.

         3.1.7   The percentage of turnover that will be taken on the retailer’s store
                 card can vary dramatically dependent upon numerous factors.
                 These include:

                 •    the size, depth and maturity of the cardholder base;

                 •    the quality of marketing by the retailer;

                 •    the retailer’s sector and customer profile;

                 •    frequency of purchases by customers; and

                 •    the level of new applications for the store card.

         3.1.8   Creation’s clients (i.e. those retailers to whom it provides services)
                 tend to achieve between [          ]% to [     ]% of their turnover on
                 their store cards. Creation estimates that a typical split of payment
                 methods used by a retailer’s customers would be as follows:

                            Credit Card                     [     ]

                            Debit Card/Cheque               [     ]

                            Cash                  [     ]

                            Store card            [     ]

         3.1.9   In the case of Creation’s store card base, the typical cardholder
                 would use the store card as a short term method of budgeting for
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                  relatively low cost items rather than as a means of long term
                  borrowing. Store cards would be one of a portfolio of credit lines
                  available to the customer. Based on customer applications to
                  Creation, [        ]% of Creation’s cardholders also hold credit cards.
                  Creation competes on added value from the special offers and on
                  brand loyalty to the retailer. Most customers weigh up the advantage
                  of the initial offer and either pay in full at the end of the interest free
                  period or over a relatively short time (the average is [         ]) and so
                  still gain a financial advantage from use of the card. For example, a
                  customer who opened a Creation store card account, spent £50 and
                  received a 10% discount (£5) and then paid off the balance in equal
                  instalments over three months could pay approximately £2.50 in
                  interest, meaning that the customer still saved £2.50.

         3.1.10   Creation store cards are predominantly used in the fashion and
                  footwear sectors of retail. Given that the average transaction value
                  on store cards is relatively low        ([   ]) and that [     ]% of
                  Creation’s cardholders pay the balance in full each month, the
                  Creation store card is not only an alternative to a credit card for
                  customers, but also to debit cards or indeed cash.

3.2      Creation’s Relationship with Retailers

         3.2.1    Creation has two types of relationship with clients. Firstly, with
                  clients who recruit customers in-store onto their store card
                  programme (e.g. Adams and JJB Sports) and, secondly, with
                  retailers or service providers who accept store cards with the DUET
                  logo (the Creation brand logo) as a payment method (e.g.
                  Sainsbury's, HMV and National Exhibition Centre Box Office).
                  Creation store cards that carry the DUET logo are accepted in over
                  7000 retail and leisure outlets in the UK.

         3.2.2    Creation also provides extensive services to its clients in the fields of
                  data-mining and analysis, direct marketing expertise, campaign
                  management and in-field support for staff training.

3.3      Suppliers of Store Cards

         3.3.1    GE Consumer Finance (UK) (“GECF”)

                  Datamonitor (UK Plastic Cards 2003, p 149) suggest that GECF has
                  10m cards and a market share in excess of 45%. However, Creation
                  believes this number to be understated, given the acquisitions by
                  GECF of Time Retail Finance in 2002 and First National (at the end
                  of 2003). Creation believes that the total number of cards GECF
                  operates is now in excess of 14 million.

                  GECF’s clients include B&Q, Comet, Debenhams, House of Fraser,
                  River Island, Laura Ashley, Arcadia [  ], Principles, Hawkshead,
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                 Bentalls, Kwik Fit, Russell and Bromley, Mothercare, Bhs, Harrods,
                 New Look, Monsoon, High and Mighty and Toys R Us.

                 GECF has begun to operate co-branded Visa credit cards with some
                 retailers, e.g. Debenhams.

                 GECF is also a major player in the provision of fixed term credit at
                 point of sale.

         3.3.2   Marks and Spencer (“M&S”)

                 M&S has 6.2 million of its own store cards in issue. It is currently
                 converting them to credit cards (“& More”) with an estimated 2.6
                 million switching – source M & S Press Office.

         3.3.3   John Lewis / HFC (HSBC)

                 John Lewis has around 1 million store cards in issue. It initially
                 operated these itself; but recently outsourced the provision and sold
                 the portfolio to HFC (now a subsidiary of HSBC) and will be replacing
                 the scheme with a credit card.

         3.3.4   Creation

                 Creation has [     ] active cards, i.e. store cards on which at least
                 one transaction has been made within the last 12 months. The total
                 number of Creation store cards in issue is [    ].

                 Creation’s clients include [   ].

                 Sygma Bank UK, a branch of a sister company of Creation, has
                 recently launched MasterCard credit card products. It has around [
                     ] of these accounts to date.

         3.3.5   Style Financial Services (Royal Bank of Scotland)

                 Creation estimates that Style has 0.5 million cards in issue. Style’s
                 clients include Moss Bros, Hobbs, D2, Mackays, Ted Baker, Richer
                 Sounds and FCUK (French Connection).

         3.3.6   IKANO Financial Services

                 Creation estimates that IKANO has 1-1.5 million cards in issue.
                 IKANO’s clients include Ikea, Habitat, Allders and Oasis, [ ].

         3.3.7   Argos Financial Services

                 Creation estimates that Argos Financial Services has 1 million cards
                 in issue. Argos Financial Services is the provider of store cards for
                 two GUS companies: Argos and Homebase.

         3.3.8   Store Cards in Issue and Sector Shares
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                 The following are the figures for store cards in issue as shown by the
                 Datamonitor survey referred to in paragraph 3.3.1. As indicated
                 above, Creation believes that some of the Datamonitor figures are
                 not up to date. Creation has, therefore, given its own estimates,
                 together with the sector share that these would indicate:


                     Company    Datamonitor   Sector      Adjusted    Adjusted
                                              share*      **          sector share*
                     GECF**     10 m             45%
                                                          [    ]          [    ]

                     Marks &    6.2 m            28%
                                                          [    ]          [    ]
                     Spencer
                     John       1.8 m            8%
                                                          [    ]          [    ]
                     Lewis
                     Creation   3m               14%      [    ]
                                                                          [    ]

                     Argos      -
                                                          [    ]          [    ]

                     Style      -
                                                          [    ]          [    ]

                     Other      1m               4.5%
                                                          [    ]          [    ]

                     TOTAL      22 million                [    ]

                 *   Note – sector shares may not add up to 100% because of
                 rounding. Sector share refers to store cards only, including store
                 cards that have converted to credit cards. It does not include retailer
                 credit cards, such as Tesco or Sainsbury credit cards.

                 ** The Datamonitor figures do not take into account the acquisition
                 by GECF of Time Retail Finance.

3.4      Creation’s Contractual relationships with Clients

         3.4.1   Contract terms are between [      ] and [     ] years, with a notice
                 period of [     ]. The minimum amount of time before notice can be
                 served varies from contract to contract. Creation has [             ]
                 contracts, each of which involved a significant financial investment
                 by Creation, which necessitated [      ] to achieve an appropriate
                 return on that investment.

         3.4.2   [       ] notice periods are for the protection of the client (i.e. the
                 retailer) as well as Creation, to allow sufficient time to effect an
                 orderly exit, implementation of data transfer and handover.
                 Switching from one supplier to another requires:

                 •       due diligence;
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                 •    a transfer of considerable amounts of data;

                 •    systems compatibility and/or testing;

                 •    trial runs;

                 •    the provision of a call centre with appropriate scripts,
                      procedures and training;

                 •    insurance contracts;

                 •    notices to customers;

                 •    re-carding customers;

                 •    new marketing materials and design;

                 •    amended terms and conditions; and

                 •    an amended Consumer Credit licence (to add extra or varied
                      trade names);

                 It is necessary to ensure that the customer experiences a seamless
                 transfer from one supplier to the other.

         3.4.3   A minimum contract term of [     ] years would be sought for a start-
                 up store card programme, as this would run at a loss for
                 approximately [       ]. This is because of the need to recover
                 investments made by the supplier (e.g. in systems) and because the
                 costs of opening accounts and issuing cards (approximately £[       ]
                 per new account) and account processing (approximately £[           ]
                 per account per year) exceed the income generated in the early
                 years, as balances build slowly.

         3.4.4   Merchant Service Charges (“MSCs”) will be competitive with, or
                 lower than, charges incurred by retailers on credit cards. [ ].

         3.4.5   [   ].

         3.4.6   The client will bear the cost of in-store point of sale materials and
                 discounts/rewards to the cardholder.

         3.4.7   Creation will have exclusive rights of supply of store card services for
                 the term because it would be impractical for the retailer to have more
                 than one supplier (e.g. in terms of consistency of communication and
                 brand image) and because of the need for commitment and
                 partnership between Creation and the client.

         3.4.8   Either Creation or the client will own the customer list. If the client
                 owns the list, Creation will be licensed to use the list for financial
                 services.
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         3.4.9    Retailers are sophisticated and often powerful buyers of services
                  who are continually demanding and negotiating better deals for
                  themselves with service providers such as Creation.

         3.4.10   Sample contracts have been provided.

4        Barriers to entry and ease of switching

4.1      Over the last ten years or so, the UK consumer credit market and the store
         card sector of that market have evolved dramatically. The rate of change
         has, if anything, increased in recent months. Key changes include:

         4.1.1    some companies have, Creation understands, effectively ceased to
                  provide store cards (for example Citibank and Yorkshire Bank);

         4.1.2    some retailers have moved from internal provision of store cards to
                  external provision (e.g. John Lewis has moved to HFC Bank (now
                  part of HSBC));

         4.1.3    some retailers or card companies have converted or are converting
                  store cards to credit cards (e.g. M&S and Debenhams) while others
                  (e.g. John Lewis) are inviting store card holders to apply for co-
                  branded credit cards;

         4.1.4    some major retailers such as Tesco and Sainsbury’s have launched
                  their own co-branded credit cards, which are intended to combine
                  loyalty schemes such as Clubcard and Nectar with a generally
                  accepted credit card;

         4.1.5    some retailers (such as Moss Bros, HMV and Mango) have begun to
                  offer store cards and have given store card providers the opportunity
                  to tender for that business;

         4.1.6    some retailers have switched their store card providers (e.g. [   ]);

         4.1.7    some store card providers and/or lenders have been sold (e.g. Time
                  Retail Finance and First National Finance have been sold to GECF);
                  and

         4.1.8    there have been two new entrants into the UK store card sector in
                  the last two years: Argos Financial Services and HFC Bank (now
                  part of HSBC).

         The market is therefore dynamic and evolving.

4.2      Argos Financial Services provides store card products to Argos Retail and to
         Homebase (both subsidiaries of GUS Plc). Argos Financial Services could
         tender for business outside the GUS group (in terms of having the necessary
         infrastructure and resources), but this would be a strategic decision by GUS.
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4.3      If a company wished to start issuing and operating store cards, it would need
         to invest in systems, call centres, skilled staff to manage operations and
         credit management, marketing, and to bear the funding costs.

4.4      Service providers such as Experian, Certegy, Sema, TSys and FDR offer
         outsourced systems and operations for retailers. Retailers would require risk
         management expertise (i.e. the expertise in deciding to whom and how
         much to lend, including the determination of score cards, cut offs and
         collection policies) but specialists such as Scorex/Experian and Fair Isaacs
         can provide relevant services.

4.5      Outsource providers can provide the necessary infrastructure relatively
         easily, but the new entrant would need to attract business from the retail
         sector (from retailers starting to offer store cards and/or by persuading
         retailers to switch their supplier) and build scale.

4.6      Retailers can and do change their store card supplier, just as they can
         change other suppliers, e.g. of merchandise or logistics. There are
         operational, technical and regulatory issues to be addressed in switching
         store card suppliers, but many of these are outside the control of those
         suppliers: for example, legal requirements in relation to the variation of
         regulated consumer credit agreements with customers, data protection and
         issue of credit tokens. IT systems are more compatible with one another
         than was previously the case, which makes data transfer and systems set-
         up less difficult than it used to be.

4.7      In order to switch suppliers, retailers would need to allocate sufficient
         managerial time and resources to deal with the relevant issues, including
         preparing an invitation to tender, drafting and negotiating necessary
         contracts, training staff, etc. External consultants or advisers may be
         desirable or necessary.

4.8      Creation has won [       ] transfers of business in the last three years ([
         ]) and has won [      ] start-up store card contracts ([       ]). [   ].

4.9      The competitive tenders which Creation has been involved in over the last 3
         years are as follows:

         [      ]

4.10     Several of Creation’s contracts with clients have come up for renewal during
         the last        [     ] years, thereby giving clients the opportunity to switch
         suppliers. The outcomes of these renewal opportunities are shown below:

         [      ]

5        Products and Pricing

5.1      Creation’s standard store card product is a running-account credit option
         account, which has a standard APR of 27.8% (2.071% monthly) for payment
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         by Direct Debit and 30.9% APR (2.275% monthly) for payment by other
         means.

5.2      Cash advances using the store card attract a handling fee of 1.5% (£1.50
         minimum) for each transaction. Creation treats cash advances as a
         purchase and extends the interest free period (up to 51 days) to customers
         in respect of cash advances, unlike other providers who charge interest on
         cash advances from the date of the transaction. After the interest free
         period, interest is charged on outstanding balances on the card account.

5.3      One of Creation’s clients (USC) provides the option of promotional credit,
         whereby 0% APR is applied for a period of 3 or 6 months dependent upon
         reaching a threshold spend in one transaction (£120 for 3 months and £165
         for 6 months). After the expiry of the promotional period, the interest rate is
         charged at the rates detailed in paragraph 5.1 above, on any remaining
         balance. Interest only accrues from the end of the promotional period; there
         is no backdating to the transaction date.

5.4      Creation offers optional “3D Insurance”, which is PPI (see paragraph 1.3.3
         above) plus price protection which covers the consumer if the price of the
         good(s) they purchased is reduced within 60 days of the transaction,
         allowing them to claim the difference, subject to a £5 excess. 3D Insurance
         is charged at £0.99 per £100 of balances, i.e. 0.99% of any balance.

5.5      The Summary Box included in promotional material details pricing and
         charges to consumers. An example of a Summary Box is in Appendix 2.

5.6      If customers operate their accounts in accordance with the terms and
         conditions of their contract with Creation, they will never be charged a fee.
         However, if they fail to pay on time or otherwise fail to comply with their
         contract, Creation does impose certain charges. The maximum charges that
         can be charged are set out in the terms and conditions. [      ]. The following
         is a breakdown of how Creation levies its charges for arrears:


                Balance                             Late Fee Levied*
                £5 or less                              [      ]
                Above £5.01 to £15.00                   [      ]
                More than £15.01                         £10.00
                Balance                        Advanced Late Fee Levied**
                Up to £50                               [      ]
                £51 - £100                              [      ]
                £101 - £500                             [      ]
                Greater than £500                        £22.00

        * A late fee is charged automatically when a customer has missed a whole cycle of
        payment, i.e. they have missed a month’s payment and have been issued a statement for
        the following month without making a payment.

        ** An advanced late fee is charged when a customer has missed two whole cycles of
        payment.
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5.7      [       ]% of Creation’s customers are subject to charges for advanced late
         fees.

5.8      Unlike some credit cards, no annual fee is levied on any of Creation’s
         accounts (either currently or in the past) and Creation does not envisage that
         it will introduce an annual fee on any of its store cards.

5.9      Creation reserves the right in its conditions to levy a £10 charge for
         exceeding the credit limit. [   ].

5.10     Creation charges a £10 fee for dishonoured cheques and bounced direct
         debits in order to defray administration costs and bank charges.

6        Information available to Consumers

6.1      Copies of all Creation’s marketing materials were supplied.

7        Creation’s Capital Structure and Financing

7.1      Creation’s capital structure is as follows:

         7.1.1   Creation is currently owned 100% by Cofinoga SA, which is a French
                 Limited Company. Creation’s paid up share capital at December
                 31st, 2003 was £10,000,100.

         7.1.2   Reserves – Creation’s reserves represent the accumulated profit and
                 loss of its ongoing activities. The value of Creation’s reserves at
                 December 31st, 2003 was £[        ].

         7.1.3   [     ]

7.2      Creation also uses or has used the following facilities: [    ]

8        Additional Information

8.1      A notable feature of store cards is customer attrition, whereby customers
         apply for a card but use it only to get the initial discount. Creation receives
         around [       ] applications for store cards each year, of which around [
         ] are for instant credit. However, [           ]% of Creation cardholders are
         single spenders. They will avail themselves of any opening discount offer,
         (typically 10% or 20% off their first purchase) and then pay off the balance in
         full or over [         ]. Creation considers that consumers recognise the
         benefits offered by store cards and typically use them for short-term
         borrowing and indeed for one-time usage.

8.2      Recruiting new customers represents a significant cost to Creation. [        ].

8.3      Creation considers that customer benefits are the main selling points of its
         store cards. As well as receiving promotions and offers from their host
         retailer, cardholders can avail themselves of numerous offers and discounts
         through the monthly DUET magazine and by participating in “Mega Day”
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         promotions. For example, Adams Childrenswear, will from time to time,
         have 1,2 or 3 day events when any DUET cardholder will save 20% on their
         purchases in store using their DUET card. An example of DUET magazine
         was provided.

8.4      Customer benefits on store cards are determined by the relevant retailer, not
         by Creation. They are subject to the decision of the retailer in the light of
         trading conditions and its marketing campaigns at any point in time.

8.5      A number of retailers in the DUET network run loyalty programmes, based
         on £1 spend earning 1 point. A £5 voucher will be issued when a threshold
         of 100 or 50 points is reached. With double point events and bonus points
         on opening an account, this equates to an effective return of between 5%
         and 10% for the consumer, which is considerably more generous than the
         return they receive on certain other loyalty schemes, e.g. M&S.

8.6      Creation’s customers are not captive, because:

         8.6.1   Creation generally includes cancellation notices in all its agreements,
                 even though they are intended to be signed in-store and would
                 therefore not be cancellable agreements under the Consumer Credit
                 Act 1974. Creation prefers credit agreements to be signed in-store
                 by customers as the customer’s signature can be witnessed by the
                 retailer’s staff, which helps prevent fraud;

         8.6.2   customers do not have to use or continue using their cards;

         8.6.3   customers can pay the balance outstanding on their card and
                 terminate their agreement with Creation at any time; and

         8.6.4   customers can (subject to status) transfer the balance outstanding
                 on their account to a credit card, usually on an interest free basis for
                 an initial period.

8.7      Creation intends to inform existing cardholders of the details included in the
         Summary Box in mailings throughout May, June and July 2004. Creation is
         considering revising customer statements to include details of time for
         repayment and amount to be repaid if cardholders only pay the minimum
         amount each month.

9        Summary

9.1      Creation operates within the UK consumer credit market, which is a highly
         competitive and dynamic market. Customers have a wide choice of where
         to shop and how to pay. Creation’s products are only a small part of the
         payment options available to consumers.

9.2      Store cards are valuable to retailers as a means of increasing customer
         loyalty and a vehicle for communication with customers. While the
         consumer’s legal relationship is with Creation as a credit provider, their
         emotional relationship is with the retailer whose store card they use.
Page 15 of 21




         Creation will only continue to have that relationship if it treats those
         consumers in accordance with the retailer’s wishes.

9.3      Creation submits that the movement demonstrated in the business-to-
         business sector and the behaviour of cardholders shows that it is a
         competitive environment for both the retailer and the consumer. [    ]% of
         Creation’s cardholders only use the card for the initial purchase, to take
         advantage of the discount and then repay the balance within [            ]
         months.

9.4      The competitive environment has changed considerably in recent years, with
         new entrants to (and departures from) the store card sector, switching by
         retailers, conversion of store cards to credit cards and retailers offering their
         own credit cards.

9.5      Switching between suppliers does happen in practice, despite the technical
         and regulatory difficulties to be overcome in doing so.

9.6      Retailers are sophisticated and often powerful purchasers who seek to
         negotiate improved terms from suppliers such as Creation.          However,
         exclusivity for a period is necessary to reflect the investments made by the
         supplier (e.g. in systems) and the costs of opening accounts and issuing
         cards (approximately £[         ] per new account) and account processing
         (approximately £[         ] per account per year) which exceed the income
         generated in the early years. It would also be impractical for a retailer to
         offer competing store cards.



APPENDIX 1: CREATION’S HISTORY, ORGANISATION AND FINANCIAL
STRUCTURE
Page 16 of 21




Creation’s Ownership - LaSer


   [        ]




 Creation Financial Services
       Origins as in-house provider of financial services to Selfridges
       Established in early 1980’s as separate company within Sears Plc, providing
       storecards for retail companies within the Group
       CFS currently have 21 Retail Partners who recruit cardholders onto branded
       storecard programmes, generating c 1,000,000 applications per annum
       [    ]
       The storecards issued by CFS have cross acceptance in all other brands, plus a
       selection of other retailers and service providers in what is known as the DUET
       network
       Key clients: Adams, JJB Sports, USC, Pilot
Page 17 of 21




 LaSer in the UK


    Core market for LaSer
    Acquisition in 1999 from Sears Plc
     • Doubled in size since acquisition
     • Significant capital investment

     • Flagship international centre of excellence      Solihull

    Specialist in store cards
    More than 1.2 million active customers
    DUET network: more than 40 retail labels
     • i.e. more than 7000 stores

    Spearheading LaSer’s development in retail credit cards
    offering customer and retailer choice
Page 18 of 21




 Creation – Part of a Leading European Group




                          (520) FTE
                                                        (188) FTE
                                                                      France

                                       (240) FTE
                                                                        UK
                                      (108) FTE



                                                                    Netherlands
         (3500) FTE


                                                                     Belgium

                                                                      Spain
                                            (462) FTE



                      (76) FTE



                                                                       Italy
      (299) FTE




                                                                      Poland

                                                                     Portugal
Page 19 of 21




LaSer Figures


                                                               Loyalty
                                                   Financial             Contact



    Pan-European indicators (including Creation)     Non                 POS




                10m       cards

                7m        loyalty members
Page 20 of 21




APPENDIX 2: EXAMPLE OF A SUMMARY BOX




                             CREATION STORE CARD




                            Summary Box

       The information contained in this table summarises key
  product features and is not intended to replace any terms
                            and conditions


APRs*    and    other   27.8% APR with payment by Direct Debit
rates
                        30.9% APR by any other payment method


                        29.7% APR for Cash Advances paid by Direct
                        Debit


                        32.8% APR for Cash Advances paid by any
                        other method


Monthly rates           2.071% with payment by Direct Debit


                        2.275% by any other payment method


                        2.071% for Cash Advances paid by Direct Debit


                        2.275% for Cash Advances paid by any other
                        method


Interest free period    Up to 51 days when you pay your balance in full
                        every month by the due date


Allocation         of   Payments will be allocated in the following
payments                order: Interest, costs, charges and expenses,
                        Cash Advances, insurance premiums, and
                        Transactions


Minimum                 £5 or 5% of the balance, whichever is greater
repayments


Fees                    £0 Annual Fee
Page 21 of 21




Charges              Handling fee of 1.5% (£1.50 minimum) for each
                     Cash Advance transaction


                     Travel Money secure delivery fee of £5


Default charges      Fee for late payment: £10


                     Fee for unpaid payment, cheque or Direct
                     Debit: £10


                     Fee for one missed payment: £10


                     Fee for two or more missed payments: £22


                     Fee for exceeding Credit Limit: £10


*The APR on a credit card explains the total cost of borrowing, of
which interest rates are just one part. Other components include all
the fixed charges such as annual fees and cash advance charges.




                      Interest is charged in calculation method on handling fee

				
DOCUMENT INFO
Description: Zero Interest Credit Cards on Balance Transfers document sample