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Last Updated: Wednesday, 8 November 2006, 00:00 GMT
Credit card cheques 'under fire'
Signing a cheque
A loan could be obtained by paying a cheque into a bank account
Capital One has been heavily criticised for sending more than one million pre-completed credit card cheques to its customers in 2005.

Each cheque had the customer's name and a pre-completed loan amount printed.

All the customer had to do in order to obtain a loan was pay the cheque into a bank account.

The Banking Code Standards Board (BCSB) said Capital One's action breached the banking code; the credit card lender said it would not do it again.

We immediately stopped any further pre-filled cheques from being sent to customers and informed the BCSB of our error
Capital One spokeswoman

The tactic of sending pre-completed cheques has been criticised by charities and MPs for encouraging a debt culture and irresponsible lending.

Under a change made in March 2005 to the Banking Code, an industry-wide voluntary agreement, lenders were barred from sending unsolicited credit card cheques to customers with a pre-completed loan amount.

Nevertheless, Capital One continued to send its customers the unsolicited cheques with a pre-completed loan amount printed.

In December 2005, Capital One told the BCSB, which oversees the implementation of the code, what it had been doing.

Robert Skinner, chief executive of the BCSB, said Capital One had been guilty of a serious breach of the Banking Code.

"We are disappointed at this serious failure of compliance management. However, Capital One, having identified the breach, co-operated fully with us in our investigation," Mr Skinner said.

The BCSB has no right to fine banks in breach of the code, but it can name and shame them.

In response, Capital One said it had taken steps to ensure there was no repetition of the breach.

"The issue was self-discovered. We immediately stopped any further pre-filled cheques from being sent to customers and informed the BCSB of our error.

"We have contacted all our affected customers to apologise," a Capital One spokeswoman said.

In total, 800,000 Capital One customers received the cheques and 20,000 were used.

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