Bank of England warns over 0% credit card offers.
The Bank of England has issued a warning about risky lending practices at some companies, including Virgin Money.
According to the Prudential Regulation Authority, such lenders could be vulnerable to sudden losses if customers on 0% interest credit card offers leave earlier or borrow less than expected.
The EIR method, allowing lenders that offer products with temporary interest-free periods to book in advance some of the revenues they expect to receive once the introductory period ends, is used by some lenders to report higher incomes. But valuation errors can weaken their balance sheets if estimated customer retention rates and future borrowing levels are too optimistic.
Source: FT
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