Have you had a catalogue, credit card or overdraft where you were given a high credit limit? So high that the monthly repayments were hard to manage so you got into more debt?
Many people were originally given sensible limits, but the lender kept increasing them.
You may have a 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. This article explains how to do this, with the points you need to put in your complaint.
In 2020, Barclaycard wrote to some customers saying their credit limit was set too high. I hope more lenders recognise this. But you can complain now, you don’t have to wait for a letter from your bank.
What is “responsible lending” and “affordability”?
The following is my summary of the regulator’s rules:
- 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 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 and your limit should not be increased.
- 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!
How to complain
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;
- a lot of recent high-cost short-term lending;
- recent credit record problems: defaults, a lot of missed payments, or arrangements to pay. “Credit builder” cards, aimed at people with a low credit score, will only reject if the problems were large;
- a level of borrowing that looks too high in relation to your income.
Your credit limit should not have been increased unless you could afford it. Any of these points suggest that you couldn’t:
- making minimum payments for a long while;
- using a lot of your limit;
- a lot of gambling showing on the statement;
- recent missed payments or an arrangement to pay on this account;
- your credit record has got worse – new missed payments, defaults or CCJs on other debts;
- your overall level of debts has gone up a lot.
Accounts with the same lender should be taken into account:
- did you have 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.
- another reader had applied for a loan and a credit card to his bank but been turned down. But the bank then increased the limit on his overdraft. The Ombudsman decided this was unfair.
You don’t need the details and dates
If your lender increased your credit limit, you don’t need the precise date. Being able to say “A few years ago you increased my credit limit. After that I could only make the minimum payments but you increased my limit again to £3000.” 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 fine. You don’t need to ask for copies of all your statements – you would get a ton of paper!
But getting your credit record can help. You can’t go back and see exactly what your credit record said in 2017, but if you look at your current credit record (get your free TransUnion statutory credit report) you can see what the pre-2017 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. Some lenders make you complete a form on their website instead. And for some lenders you have to send a letter.
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.
Points to think about
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 complain if you already have a CCJ for the debt. Tell the lender you want the CCJ removed as part of the settlement of your complaint.
But if you have had an IVA or bankruptcy after these problems, or if you are still in a DRO, then you shouldn’t complain – ask in the comments below for details.
If your complaint is about an account that you closed more than 6 years ago, it’s harder to win. 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. Defaults, DMPs and CCJs over 6 years old will have disappeared from your credit record, so unless you have other things (letters? emails?) referring to them, it can be hardto show the problems you had.
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!
Another approach for 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 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 lender) 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 but 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 l
ife. 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.
Don’t use a claims company
Claims firms are pretty useless at this sort of thing. 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 this article or by going to your local Citizens Advice.
Don’t be put off by a rejection – sending a case to the Ombudsman
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 – send your complaint to the Financial Ombudsman Service (FOS).
The simple way to send FOS a complaint is their online form – it asks for all the little things they need to set up your complaint correctly (eg your date of birth and whether this is a joint complaint). You can just copy out what you put in your complaint to the lender but if the lender has rejected your complaint or given a poor offer, mention why you think this wrong.
If your credit record shows that you had other debts problems it’s a good idea to send FOS a credit report. If you have kept old ones, send the oldest one you have, otherwise just send the current one. Also get your bank statements if they will support your complaint and send those to FOS too. Don’t wait to be asked for these.
FOS is a friendly service but it isn’t speedy. You can just use normal English, not legal terms. Using a claims company or a solicitor will not speed this up and will not make you more likely to win your complaint.
BUT is a refund what you really need?
This depends how large your current financial problems are. Complaining about newish debt will often on;y get the interest removed – you still have to repay what you borrowed.
And if you have a lot of debt that isn’t from lenders, but is priority debts such as utility bills, rent, council tax and benefit overpayments, then getting a refund on a couple of catalogues may not really improve your situation that much.
Here it’s good to talk to a debt adviser now about your options. Otherwise you may spend months arguing with lenders and going to FOS and still be in a mess at the end of it… So phone National Debtline on 0808 808 4000, tell them you are thinking about affordability complaints but you would like to know what your other debt options are.