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FOLLOWING THE OMBUDSMAN'S ADJUDICATION OF A DUAL VARIABLE-RATE TEST CASE, C&G AGREES TO SETTLE WITH ALL BORROWERS WHOSE CIRCUMSTANCES ARE THE SAME AS THE CASE TESTED Following the Financial Ombudsman Service (FOS) preliminary assessment in respect of a test case relating to the C&G Variable Rate, C&G has decided not to seek a final determination from the Ombudsman. We will therefore settle with each borrower whose circumstances are the same as those of the test case - i.e. those who had complained to C&G while the C&G Variable Rate offer was still open. The number of customers affected is small - in the hundreds - and we will be writing to all qualifying borrowers within the next two weeks. However, the FOS is currently reviewing a further test case in which different circumstances apply and which we believe we will win. This relates to a case where an application for the C&G Variable Rate was received after the product had been withdrawn. Customers are urged to wait until the result of this second adjudication is announced before considering any action. C&G managing director, Roger Burden, commented: " We are disappointed with the Ombudsman's ruling. We feel that the adjudications against all lenders have resulted in the withdrawal of initiatives that were designed to benefit borrowers not disadvantage them. This was also the view of the media when the initiatives were launched. more/ FOLLOWING THE OMBUDSMAN'S ADJUDICATION../2 "It should also be remembered that the Financial Ombudsman Service is there to determine individual complaints in individual cases and not to determine lenders' strategy or pricing. I believe that recent reporting of decisions in respect of the dual interest rate issue, and arguably even the rulings themselves, have blurred that line and created confusion. Consumers benefit from strong competition between lenders and there is a danger that this could be substantially diminished if we all fear that new lending initiatives might render us liable to retrospective financial penalties. "C&G borrowers have always benefited from being able to transfer to any of our available products - subject to the terms and conditions of their existing mortgage arrangements - and this will continue. " ENDS Notes to Editors 1. Between 30 April and 10 September 2001 C&G introduced a second tier of variable rates into its mortgage range. This was called the C&G Variable Rate and was priced below the C&G's Standard Variable Rate - the rate upon which all existing capped, discount and variable rate mortgage deals are based. The new rate was an option only made available to existing customers and was not available to new borrowers. 2. Throughout the same period a customer mailing exercise was commenced to offer the new rate exclusively to C&G borrowers who weren't still within the terms and conditions of an existing mortgage arrangement from which they had already benefited. C&G classified these customers as eligible borrowers. During the period of the mailing, eligible borrowers who contacted C&G in advance of receiving a letter were also permitted to convert to the new rate if they wished. All C&G borrowers would have become eligible over time, as their existing mortgage arrangements came to an end. 3. The new rate was withdrawn owing to uncertainties resulting from complaints to the FOS against other lenders. Because of this only about 5% of eligible customers were contacted and, in total, only about 1% chose to convert to the new rate before it was withdrawn. Notes to Editors cont.. 6. The Ombudsman has now ruled that one of C&G's ineligible borrowers who applied to transfer to the C&G Variable Rate while it was still available, and whose application was declined, should have been permitted to do so. We have been asked by the Ombudsman to reimburse the customer with the difference in interest rates from the date the customer applied to transfer to the new rate, plus a small payment for inconvenience caused. 7. As the new rate was not offered to 95% of C&G's eligible customers before the initiative was withdrawn, we believe that it would not be right for us to allow other customers to benefit from it now. 8. C&G could not have switched customers automatically because borrowers needed to indicate whether they preferred to stay on annual interest or move to daily interest. Each transaction involved a certain amount of account administration. 18 June 2002 Enquiries: Press Office: Peter Mounty/Esther O'Reilly-Cain/Susan Knight............01452 373670 E- mail..............................cgpressoffice@cgpressoffice.demon.co.u k ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/06/18/20020618BIT00370/wkr0001.doc http://www.waymaker.net/bitonline/2002/06/18/20020618BIT00370/wkr0002.pdf

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