Have you had a catalogue, credit card or store card 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.
(This article used to cover overdrafts as well – but I have now written a separate article about asking banks for overdraft refunds.)
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.
- Unless you can 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 not for a prolonged period.
- A lender shouldn’t increase a credit limit without new checks. Just because you have made 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 probably have declined your original application:
- increasing mortgage arrears;
- a lot of recent high-cost short-term lending;
- recent credit record problems: defaults, missed payments, or arrangements to pay;
- a level of borrowing that looks too high in relation to your income.
Your credit limit should not later 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 for a long period;
- a lot of gambling showing on the account 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 debt has gone up a lot or you are using payday loans.
Make one complaint when you had several accounts with the same lender:
- some firms have several different brand names. Very owns Littlewoods, Shop Direct, Kays, and Isme. N. Brown owns JD Williams, Simply Be, Home Essentials, Jacomo. New Day owns the Aqua and Marbles cards.
- 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 to his bank but been turned down. But the bank then increased the limit on his credit card – that is unfair!
You don’t need the exact details and dates to complain
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 score was in say 2017, but take a copy of your current credit record as soon as you complain (get your free TransUnion statutory credit report). That will show 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 some people that will have been when you applied for 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. You must delete or change these to tell your story.
I want to complain about irresponsible lending by you for my name of card or catalogue account number 987654/444. My date of birth is dd/mm/yy. The email address I used for this account was firstname.lastname@example.org.
Then say they should never have given you the account:
You should never have allowed me to open an account with such a large credit limit. When I applied in 2011, you should have checked my credit record and you would have seen I had recent missed payments to a credit card and a default only two months before on a loan.
Or say that they should not have increased your credit limit:
You should never have increased my credit limit in 2015 or several times between 2013 and 2018. At that time I had only made minimum payments on this credit card for a long while and/or I was using a very high level of my credit limit. This should have shown you that I could not repay my balance within a reasonable length of time, so you should not have let me borrow more.
I do not know the exact months of these credit limit increases. In your reply to this complaint, please tell me when the increases were and how much the limit went up to on each occasion.
If you had properly checked my credit record before increasing my limit, you would have seen that in the two years since my account with you was opened, I had got additional late payment markers and defaults and taken out a lot of other credit. This should have warned you I was struggling with my finances and it was not responsible to lend me more. By increasing my credit limit you made my financial position worse.
If the lender should already have known you had problems with your account, mention these
You should also have realised that I was having difficulty because:
of the late payment charges you added to my account
of the gambling transactions showing on my card statement
I had missed two payments to you in 2012
I had already asked you on the phone if it was possible to stop adding interest for a while].
End with asking for a refund:
I would like you to refund me all the interest I paid and any late payment charges [on the account OR after you increased my credit limit in 2014].
I would also like any late payment and default markers to be removed from credit records after this point. I understand that if I take this complaint to the Financial Ombudsman, 8% simple interest is usually added to a cash refund.
Points to think about
These complaints can be made if your account is still open, or if it is closed and settled, or it is with a debt collector. NB your affordability complaint should go 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.
Many lenders will reject complaints about something that was more than 6 years ago and say the ombudsman won’t look at them.
But the Financial Ombudsman will often look at old problems if you have only found out in the last three years that you can make the complaint.
These older cases however can be 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? bank statements?) it can be difficult. You don’t need all of those things, but you need enough to show that you had problems.
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!
A different 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.
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 and catalogues.
For very old accounts that have been sold to debt collectors this may be more likely to work than an affordability complaint, so it’s worth trying first.
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 later 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.
Don’t be put off by a rejection – send the case to the Ombudsman
If a lender rejects your complaint or offers a low “goodwill” gesture, don’t be fobbed off – they want you to give up.
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! Or if the lender dismisses your complaint as the account was opened over 6 years ago.
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 debt problems, send FOS a copy of it. If you have kept some, send the oldest one you have, otherwise 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 not fast. You can just use normal English, not legal terms. Using a claims company or a solicitor will not speed this up or 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 only get the interest removed – you still have to repay what you borrowed.
And if you have a lot of debt that isn’t from these lenders then getting a refund on a couple of catalogues may not improve your overall situation 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.
Ask questions in the comments below!
There are hundreds of comments below this article from readers who are using this template. It’s a good place to see how these complaints often go and to ask any questions.