Store card chief who wants to take all of the credit

Brad Cooper ought to be a household name. More than 11 million adults in this country owe him, or rather the company he runs, an average of £300.

As the head of GE Capital in Britain, the personable Australian controls a sizeable chunk of the £4.8 billion store card market. But Cooper has so far been hidden behind a raft of high-street shop names. Shoppers with store cards from Debenhams, Asda, Harrods, Russell and Bromley and Laura Ashley, to name a few, do not realise that ultimately he is their bank manager.

That is set to change in September, when GE Capital (a division of General Electric) relaunches itself as GE Money in an attempt to win over the 10 million of its customers who hold credit cards and loans with other banks.

Cooper has also raised his profile as a result of the Competition Commission's investigation into store cards after consumer groups and MPs protested that interest rates were unjustifiably high, that the market was dominated by a small group of companies and was closed to newcomers.

Ironically, though, by the time the commission reports - expected to be about the end of this month - the industry will have moved on. Store cards are in decline, according to research group Datamonitor. 'Store card spending has been flat at best over the past five years,' says analyst Kieran Hines. 'Last year it declined 17 per cent, mostly due to companies moving customers on to combined credit and store cards.'

Put simply, there is not much profit in store cards, although Cooper insists it is a market he still wishes to play in.

'This is a very competitive market,' he says. 'People open up their wallet and they have a store card but a whole range of other credit cards next to it. That is why we believe the market is consumer credit, not store cards.'

He says 90 per cent of GE's 11.3 million customers also have a credit card. 'They use their card for different purchases depending on the discounts they get. They use personal loans to pay off a store card and transfer balances.'

Having argued forcefully for more than a year that consumers used credit cards for purchases they would not use store cards for, and vice-versa, Cooper launched joint credit and store cards last September. It cost £20 million to build the platform and the first three participants are Asda, Harrods and Debenhams. Retailers like store cards for two reasons: finance providers will pay them millions for access to their customers and the cards are useful marketing tools.

Yet customers are using the combined store/credit card primarily to buy outside the stores they are branded with, says Cooper. He is pleased: 'It increases the balance on the card.'

Does this not add to the UK's £1 trillion credit mountain? 'It does not increase the level of debt. It just moves from a competitor's card to ours but allows you to bring the [interest] rate down.'

The argument has echoes of the one used in the past by tobacco companies, who said that advertising did not increase smoking, it persuaded smokers to switch (or stick with) a brand.

How does it feel to be arguing about debt in the context of headlines about suicides, excessive interest rates and the threat to the economy of a giant debt burden? 'Store cards account for 3 per cent of the total unsecured lending in this country and 0.03 per cent of total debt in the UK,' Cooper says. 'This percentage is in decline.

'I do not see the £1 trillion [debt] growing at all. The factors that have been driving this up are low interest rates and low unemployment. You can't see that getting lower. We are competing for a share of the debt. It is going to be about price and brand and reputation and the internet, although some people like loyalty programmes. The skill will be about understanding your customer base.'

Cooper would like to see consumer protection increased by improving transparency between lenders: 'I think it is absolutely critical to have full data sharing. It is impossible to be a responsible lender if you do not have all of the information.'

He says he regularly talks to the Consumer Credit Counselling Service and Credit Action: 'We want to help customers make informed decisions about borrowing. By the time someone gets into debt counselling, it is almost too late [to help them].'

Cooper has been well-trained in the GE style. Jack Welch, legendary GE chairman and chief executive until 2001, has just published a book, Winning , distilling his techniques, which Cooper says he applies. Internal and external relationships are the key, he says, but ultimately it comes down to growth.

'It is performance-driven. This is a meritocracy. It does not matter how long you have been here, what gender you are or who you know. People want to participate in it.'

As Welch prescribes, Cooper lives what he preaches. He wants to make GE more accessible because he believes this is good for business. Welch preaches 'absolute candour' and Cooper appears to be taking it literally.

He has also embraced the GE mission to anticipate change. Jumping before being pushed, the store card providers are cleaning up their act. In November 2003 GE began to put basic information on its point-of-sale literature, including the interest rate, fees and charges and all associated costs. There is also a 60-day 'cooling-off' period.

But the bottom line for many critics remains that although base lending rates are the lowest they have been for 30 years, store card rates have not fallen much below the 29 per cent average. Cooper says this is because average balances are small and servicing costs high. 'We have 11.3 million customers who receive monthly statements and send payments to collection points, but we have an average balance of only £150, compared with £1,300 on an average credit card.'

So the case for selling credit cards is compelling. 'Debt is good,' proclaims Cooper. 'Overindebtedness is the bad thing, for the consumer, the lender and the economy. Debt is healthy in a thriving economy like the UK. It is the backbone of a strong economy. People should be able to borrow and buy things they want, but we have all got to be cautious on both sides that people do not overextend themselves.

'It should not be beyond us [the lenders] to come up with a system that enables us to share important information and underwrite without using the information to target each other's customers.'

GE needs another income-earning stream in this country. Whatever the Competition Commission finds this month, store cards as we know them are in decline. They are also harder to make profit from, not least because retailers have wised up. M&S capitalised on its store and credit card by out sourcing to HSBC. John Lewis has professed itself happy with its scheme with the same provider. Barclays has strengthened its hand by winning the House of Fraser business from GE Capital.

'Since the Competition Commission inquiry began there are definitely more players in this market,' notes Datamonitor's Hines. 'It is another way in which events have overtaken the regulator.'

Whatever the commission's findings - and it is hard to see how it can find a monopoly at play - perhaps the biggest contribution has already been made.