A LEGAL challenge is threatening to scupper plans by Lloyds TSB to transfer call centre work in India - and have huge implications for other financial services organisations like York-based Norwich Union Life.

The challenge is being mounted by a Lloyds TSB customer on the grounds that the transfer infringes Data Protection legal requirements.

Bindmans, the solicitors acting for the un-named woman customer and backed by the Lloyds TSB Group Union which represents 45,000 staff, is arguing that India does not have the same stringent standards of data protection as are legally required in Britain.

Under European legislation sensitive personal data can only be transferred outside the EEC with the express consent of customers. If the Government appointed information commissioner rules against Lloyds TSB on the issue it will blow a hole in the growing trend in the UK to cut costs by outsourcing call centre work to India.

Peter O'Grady, assistant secretary of Lloyds TSB Group Union, said that if successful, the argument would force Aviva, parent company of York-based Norwich Union Life, to re-think its strategy of outsourcing work abroad.

Aviva has already identified cost savings of about £250 million, including plans to cut 2,350 jobs in the UK to "export" work to India.

Already it has announced plans to outsource its IT operations at a cost of 700 jobs across Britain, including 150 at York.

Mr O'Grady said: "If this challenge is successful - and a decision is expected imminently - companies like Aviva would either have to backpedal or get customers to confirm they are happy to have their details given outside the jurisdiction of the Data Protection Act.

"It may be that they will be forced to provide a separate service for customers who say no."

But Aviva is insisting that it is already paying heed to the Data Protection Act. Its spokesperson said: "From our perspective our Indian operations are fully compliant with Data Protection. All data is held in a UK server and not in India.

"When customers phone into our call centre network they are advised that their data may be processed by external suppliers or may be used outside the UK and this happens regardless of whether the call is received at our UK call centres or in India.

"We have a very close relationship with out outsourcing partners in India to monitor service and operational issues to ensure that there is no break of UK data protection rules."

A spokeswoman for Amicus, the Union representing workers at Norwich Union Life in York, said: "We will be monitoring this case carefully.

"We have thought of this before and know from our inquiries that many companies argue that they keep the database in Britain.

"Perhaps the most powerful argument, though, is that outsourcing abroad is not what customers want."

Updated: 11:53 Wednesday, August 18, 2004