Have you had a catalogue or a credit card where you were given a high credit limit? So high that the minimum repayments were hard to manage without borrowing more? Many people were originally given sensible limits, but the lender kept increasing them.
This approach can also be used for overdrafts if your limit was increased.
Thousands of people got refunds from payday loan complaints in 2016, see How to get a payday loan refund for more information. Some people have been wondering if the same “rules” apply to other types of unaffordable borrowing. They do!
Catalogue and credit card irresponsible lending complaints are similar to payday loan affordability complaints. But they are not as easy to win and there are some extra points that matter… So here is a new article just for catalogues, credit cards and overdrafts.
You may have good complaint that the lender was irresponsible in allowing you to borrow so much that the debt was unaffordable. You can complain to the lender and ask for a refund of the interest you paid. There is a template letter below.
What is responsible lending?
The following is my summary of regulator’s rules about affordability and responsible lending:
- A lender must check if credit is affordable when you apply for it. A mortgage lender will ask for bank statements, but a catalogue offering a £200 credit limit doesn’t have to go into so much detail.
- If you can’t make the monthly repayments without difficulty, credit isn’t affordable. This means being able to pay all your normal household bills, expenses and your other debts.
- If you have to borrow more most months, this would not be affordable. This could be borrowing on the same account – making a credit card repayment but then using the credit card to pay for food so the balance never drops is “borrowing more”.
- You have to be able to repay a debt within a reasonable period of time. Paying the minimum amount is OK for a short while, but if you did this for a long period, this suggests the debt isn’t affordable.
- A lender shouldn’t increase a credit limit without new checks. Just because you have been able to make your repayments so far doesn’t mean you can manage a larger limit.
There are links and some extracts from the actual rules here. You don’t need to quote them in your complaint letter – it’s better to write simple English, explaining your situation.
In April 2017 the regulator started looking at new rules in this area, for example:
- after 8 months of a customer making minimum payments, a firm will not be permitted to increase the limit of a customer unless the customer agrees. After 13 to 14 months the firm will not offer any limit increases.
- a firm will not be allowed to offer an increase where the client has a high credit utilisation.
These aren’t yet live and won’t effect what firms have done in the past. But I’m mentioning them here because they show what the regulator thinks a clearly unaffordable situation might look like. So it’s this sort of thing – if you were only making minimum payments for a long while or were using most of your credit limit that you should be mentioning in your complaint.
Good reasons to complain
If the lender could see any of these on your credit record, they should have declined your application:
- increasing mortgage arrears;
- recent payday loans or other high-cost short-term lending such as guarantor loans, logbook loans, doorstep lending;
- recent credit record problems: defaults, a lot of missed payments, or arrangements to pay;
- a level of borrowing from other lenders that appears too high in relation to your income.
Once you had an account, any of the following suggest that you shouldn’t have been given a larger limit:
- only making the minimum payments for a long while;
- if you are using a lot of your credit limit;
- any recent missed payments or arrangements to pay on this account;
- your credit score has got worse since your account was opened – new missed payments, defaults or CCJs on other debts;
- your overall level of debts (as shown on your credit record) has gone up a lot
- you had arrears on other accounts with the same lender.
One reader was allowed to open a second account with Capital One – the Ombudsman decided this was unfair as he had quickly reached and gone over his limit on the first card.
Making a complaint
If your lender increased your credit limit, you don’t need the precise date – being able to say “In 2014 you increased my credit record. After that I could only make the minimum payments but you increased my limit to its current £3000 in 2015” is fine.
If you have your paper statements or emails, these may help, but if all you can say is “you increased my credit limit several times” that is OK.
Getting your credit record can help. You can’t go back and see exactly what your credit record said in 2013, but if you look at your current credit record (get your Noddle report for free) you can see what the pre-2013 problems were that the lender should have spotted.
What you are looking for is the point at which the lender made an irresponsible lending decision. For a few people that will have been when you applied to open the account. For many people, it will have been when your credit limit was increased.
The best way to complain is by email. It’s free, instant and you have a record of what you sent and when. In the suggestions below, I’ve invented some examples for the bits [in italics in brackets]. Change/delete/add to these to tell your story.
Start off with the basics: identify you and your account and make it clear what sort of complaint you have:
Then either say they should never have given you the account:
and / or say that they should not have increased your credit limit:
It will help your complaint to add more details about why the account repayments were unaffordable for you:
If the lender should already have known you had problems with your account, mention this
It will help your complaint to add more details about affordability:
End with asking for a credit card or catalogue refund:
These are “new” types of complaints
Not many people have made these complaints yet, so if you ask in the Comments below “has anyone had any luck with a Littlewoods refund?” you probably aren’t going to get replies… This doesn’t mean you can’t win your complaint!
If a lender rejects your complaint or offers a low “goodwill” gesture, don’t be put off. In particular, if the lender says you had made all the payments to them on time so they had no reason to think you had problems, you can ignore this – the lender should have made other checks before increasing your credit limit!
When you have a final Response from the lender, or after 8 weeks if you haven’t had a Final Response, take your complaint to the Financial Ombudsman. You can just copy out what you put in your complaint to the lender. The FO is a friendly service.
These complaints can be made if your account is still open, or if it is closed and settled or with a debt collector. NB complain to the original lender, not the debt collector. You can’t complain if you already have a CCJ for the debt.
If your complaint is about an account that you closed more than 6 years ago, it isn’t likely to be successful. If the account has been open within 6 years but the credit limit raises were more than 6 years ago, you may have difficulty. These older cases are hard for you to produce much evidence for. Unless you have kept paperwork referring to defaults, DMPs and CCJs before this time as these will have disappeared from your credit record.
But if you feel you have a strong older case and you have some evidence then take it to the Ombudsman and let them decide!
An alternative approach for very old accounts
If your account was opened a long while ago and you defaulted and still owe a balance, perhaps in a DMP, think about asking the current creditor (usually a debt collector) to produce the Consumer Credit Act agreement for the account.
There is a template letter for this from National Debtline: Credit agreements – getting information.
If the current creditor (not the original owner) can’t produce a proper copy of the agreement, the debt cannot be enforced in court and you can simply stop paying anything to it. This applies to all credit cards, store cards, catalogues. Also almost all loans (not mortgages, some secured loans, not items that have been pawned and not overdrafts). Discuss the response you get with National Debtline if you aren’t sure it is adequate.
For older accounts this is more likely to work than affordability complaint, so it’s worth trying first. It is common for debt collectors with an old account (eg pre 2007 MBNA and Egg cards) to be unable to produce correct paperwork.
Poor reasons to complain
You can’t complain just because the interest rate was high or because you have paid them a fortune over the years.
A poor credit score on its own isn’t a reason why you shouldn’t have been given an account. You could have been recently discharged from bankruptcy – that makes a “bad credit card” such as Vanquis or a catalogue an ideal “first new credit” and it may be completely affordable because going bankrupt solved all your previous debt problems. But if your credit score was poor because you were having a lot of problems with your existing debt, the account should have been refused.
You won’t get a credit card or catalogue refund if something unexpected went wrong in your life. If you had been managing a credit card fine for years but then you lost your job or separated from your partner and you defaulted, this isn’t the lender’s fault.
Tip – don’t mix different types of complaints
Keep other sorts of complaints separate. Leave a few weeks between making each type of complaint and say in the first sentence “I have complained to you on dd/mm/yy about irresponsible lending. This is a separate complaint about yyyyyyyy.” Here are other common complaints people have about catalogues and credit cards:
- PPI This sometimes had names such as Card Repayment Protection. You may have a good complaint that this was mis-sold, perhaps the box was automatically ticked when you applied for the credit etc. MoneySavingExpert has a great page on PPI complaints which has a checklist for misselling reasons, bank helpline numbers, template letters etc.
- Vanquis’s ROP Not really PPI but a sort of insurance add on to the Vanquis credit card that works out to be incredibly expensive over time. See Vanquis ROP refund page for details, including an example of a large refund a reader has had this year.
- Consumer complaints If you have a complaint about a specific product or its delivery, this will have to go to a different Ombudsman. To get help with these, contact Citizens Advice Consumer Helpline.
- Credit record problems These are common with credit card and catalogues. See What should the default date be for a debt?
- Interest not frozen when you told them you were in difficulty Catalogues are often very poor at handling customers who have financial problems, see What to do if a creditor won’t freeze interest for details.
Need some help?
Claims firms are pretty useless at this sort of thing. They are OK (but expensive) with PPI complaints which are just standard letters. But irresponsible lending/affordability complaints are very individual. The only person that can write the template letter above is you!
You can get better help for free by asking in the comments below or by going to your local Citizens Advice.