Catalogue Creditcard Refund (2024)

PAYDAY LOANS

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 the 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.

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 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.

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.

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 limit. After that I could only make the minimum payments but you increased my limit again to £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 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:

Keeping an eye on your credit reports is a good idea, but how should you do it?

In 2022 there are more than sixteen different ways to check your credit record!

The myth of a single credit score

You don’t have “one credit score” or “one credit record”. You have three different ones.

This is because there are three main Credit Reference Agencies (CRAs) in Britain:

Experian;
Equifax; and
TransUnion (used to be called Callcredit).

Each CRA has a record of your data which has been sent to them by the lender. Some lenders report to all three, but most lenders only report to one or two CRAs. In 2016, about 50% of lenders only report to one CRA, for example, many payday lenders only report to TransUnion.

So a report on your Experian file can look very different from a report on your Equifax file. None of them are “better”, they are just reporting on information from different lenders.

Top Three credit reports – all free!

Tens of thousands of people are paying for expensive subscription services when they could get all the information they need for free.

Everyone should use one of the following top three credit record checkers or, even better, all three:

MSE’s Credit Club for Experian details - http://www.moneysavingexpert.com/creditclub
Clear Score for Equifax details - https://www.clearscore.com/
Credit Karma for TransUnion (Callcredit) records – this replaces the old Noddle report - https://www.creditkarma.co.uk/

They are all free, no sneaky free first month then a high charge if you forget to cancel.

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.

Template complaint

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:

Dear Sir or Madam,

I want to complain about irresponsible lending by you for my [Very] account number [987654/444]. My date of birth is dd/mm/yy. The email address I used for this account was myaddress@whatever.com.

Then either say they should never have given you the account:

You should never have allowed me to open an account. When I applied in [March 2011], you should have checked my credit record and you would have seen [I had recent missed payments to my NatWest credit card, a default only two months before on a Barclays loan and my overdraft had gone up for several months in a row].

and / or say that they should not have increased your credit limit:

Don’t be put off with a rejection

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). You can just copy out what you put in your complaint to the lender. The FOS is a friendly service.

Timing

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.

Old accounts

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 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 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 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.

October 2020

Template Letter Studio

Dear Sir or Madam,

I want to complain about irresponsible lending by you for my studio account number [insert account number]. My date of birth is [dd/mm/yy]. The email address I used for this account was [EMAIL].

You should never have allowed me to open an account with such a large credit limit. When I applied in [insert date], you should have checked my credit record and you would have seen [Insert reason that this would have not have been affordable to you].

You should never have increased my credit limit in [insert dates]. At that time [I had only made minimum payments on this credit card for a long while or other reason] and [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.

If you had properly checked my credit record before increasing my limit, you would have seen [insert any defaults/ccjs/other you have had]. 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.

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 DATE]. 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 this sort of refund.

I look forward to hearing a reply from you.

Kind regards,

[NAME]