Have you ever found yourself in a situation where the credit limit on your catalogue, credit card, or store card was so high that the monthly repayments became unmanageable, leading you into more debt? Many people have experienced this issue, originally being given a reasonable credit limit, only to have it increased by the lender without considering its affordability. If you find yourself in this predicament, you may have a valid complaint, suggesting that the lender was irresponsible in allowing you to borrow such an unaffordable amount. This article aims to guide you on how to complain and ask for a refund of the interest you paid.
What is “Affordability”?
According to the regulator’s rules, lenders are obligated to check if credit is affordable when you apply for it. While a mortgage lender typically asks for bank statements, a catalogue offering a £200 credit limit doesn’t require as much detail. Additionally, lenders should reassess affordability when deciding to increase a credit limit. Credit is considered unaffordable if paying it leaves you with insufficient funds for your bills, everyday expenses, and other debts. Furthermore, if you find yourself borrowing more each month, including borrowing on the same account, such as making a credit card repayment but then using the credit card to pay for essential items, this would also be deemed as “borrowing more.” Lastly, you should be able to repay the balance within a reasonable period, as paying only the minimum amount for an extended period is not sustainable.
How to Complain
Good Reasons to Complain
If your credit record displays any of the following, the lender should have likely declined your original application:
- Recent credit record problems, such as defaults, missed payments, arrangements to pay, mortgage arrears, or payday loans.
- Possession of another credit card with the same lender, where you were only making minimum payments and using it for essential expenses like food and petrol.
- An excessive level of borrowing in relation to your income.
Your credit limit should not have been increased if you couldn’t afford it. In addition to the points mentioned above, the following circumstances should have alerted the lender to your existing financial difficulties:
- Making minimum payments for a considerable period.
- Utilizing a significant portion of your credit limit over an extended time.
- A significant amount of gambling transactions on the account statement.
- Recent missed payments or arrangements to pay on this account.
- A substantial increase in your overall level of debt according to your credit record.
If the same lender provided you with two credit cards or catalogue accounts, it is likely that the second one should never have been approved.
You Don’t Need All the Details to Complain
When addressing the increase of your credit limit, you don’t need to recall the exact date. If all you can mention is “you increased my credit limit several times,” that is perfectly acceptable. It’s unnecessary to request copies of all your statements, as it would result in an overwhelming amount of paperwork. However, obtaining your credit record can be helpful. Although you can’t review your credit score from previous years, obtaining a copy of your current credit record as soon as you file a complaint can reveal the pre-2018 issues that the lender should have identified.
Template to Complain & the Email Address to Use
Email is the recommended method for lodging a complaint. It is free, instantaneous, and provides evidence of what you sent and when. Some lenders prefer you to complete a form on their website, while others require a letter. You can find a list of credit card and catalogue email addresses to use. In the suggestions provided below, I have included examples for the italicized portions that you should modify or delete to tailor the complaint to your specific circumstances.
Points to Consider
You can file these complaints if your account is still open, closed and settled, or with a debt collector (note that the complaint should be directed to the original lender, not the debt collector). Even if you have a County Court Judgment (CCJ) for the debt, you can still complain and request the CCJ’s removal as part of your complaint settlement. If you have undergone an Individual Voluntary Arrangement (IVA), filed for bankruptcy, or are currently in a Debt Relief Order (DRO), the situation becomes more complex, so it’s advisable to seek guidance in the comments section below.
The Financial Ombudsman (FOS) can only consider complaints dating back to April 2007 when the law changed to allow such claims. Many lenders may dismiss complaints regarding issues older than six years, asserting that the Ombudsman will not review them. However, the FOS frequently considers older problems if you have only recently discovered your eligibility for a complaint in the last three years. For example, if your account was opened in 2015 and the lender increased your limit in 2018 and 2019, the two limit increases fall within the last six years and can undoubtedly be examined. Nevertheless, complaints concerning events that occurred more than six years ago may be challenging to substantiate without substantial evidence. If you believe you have a strong older case supported by evidence, present it to the Ombudsman for a final decision.
An Alternative Approach for Old Accounts
If you have an old account that was opened a significant time ago, you defaulted on it, and you still owe a balance, particularly if you are in a Debt Management Plan (DMP), consider asking the debt collector to provide the Consumer Credit Act agreement for the account. If the current creditor (not the original lender) fails to produce a proper copy of the agreement, the debt cannot be enforced in court, and you can cease making any further payments. This applies to all credit cards, store cards, and catalogues.
Is a Refund Really What You Need?
The answer to this question depends on the extent of your current financial difficulties. Complaining about relatively new debt often results in the removal of interest, requiring you to still repay the borrowed amount. Engaging in prolonged disputes with lenders and the Ombudsman without resolving your financial troubles may not be the most effective approach. To assess your options beyond affordability complaints, it’s advisable to contact National Debtline at 0808 808 4000.
Poor Reasons to Complain
Complaining solely based on a high-interest rate or the total amount you have paid to the lender over the years will not result in a successful claim. A poor credit score alone is not sufficient grounds to contest the approval of an account. However, if your credit score was negatively impacted due to existing debt problems, the lender should have rejected your application. Unexpected life events that occurred after you had managed your credit card well, such as job loss or separation, do not warrant an affordability complaint as the lender cannot be held responsible.
Don’t Be Discouraged by Rejections or Poor Offers
Lenders Often Reject Valid Cases
If a lender rejects your complaint or provides a low “goodwill” offer, don’t be discouraged. Lenders may attempt to dissuade you from pursuing your claim. In particular, if the lender asserts that you made all payments on time, leaving them unaware of any issues, you can disregard this response. Likewise, if the lender dismisses your complaint by claiming that the account was opened over six years ago. Once you receive a Final Response from the lender or after eight weeks have passed without a Final Response, escalate your complaint to the Financial Ombudsman Service (FOS).
Is a “Partial Uphold” Satisfactory?
Sometimes, lenders admit that they should not have increased your credit limit beyond a certain point and offer a refund of interest for balances exceeding the previous limit. This resolution is often referred to as a “partial uphold” or a “partial refund” based on proportionate interest. However, the actual refund amount in this situation may be considerably less than expected. Therefore, it is important to ask the lender for details regarding the refund size before accepting their offer. Considering that you were already facing financial difficulties at that point, with your cards nearly maxed out and used for essential expenses while making only minimum repayments, the lender should have intervened by freezing all interest. Consequently, a partial refund may not suffice, and you may be entitled to a complete refund of interest from that point onward.
How to Escalate Your Case to FOS
To file a complaint with the Financial Ombudsman Service (FOS), submit your case through their online form. You can copy the contents of your complaint to the lender, but if your complaint is rejected or you receive a poor offer, explain why you believe the decision is incorrect. Enclose a copy of your credit record if it highlights other debt-related issues. If applicable, include the oldest bank statement you possess or provide the most recent one. Remember to use clear and straightforward language rather than relying on legal terms. Engaging the services of a claims company or solicitor will not expedite or improve the process.
Ask Questions Below!
The comments section below contains numerous feedback from readers who have utilized this template. It serves as a valuable resource to understand the typical course of these complaints and allows for any questions you may have to be addressed. So, don’t hesitate to reach out and seek the information you need.