Mum's financial ombudsan complaint- is this fair

[janettheplant]

Hi Folks,

I have been helping mum (80) with a credit card issue. She took out a credit card in 2021 when she was struggling ( we didn't know). The card was opened with a limit of 1200 in May 2021 with a limit of £1200. In October 2021 they increased the limit to £2450. A year later they increased the limit to £3450. At the point of each increase she was close to the limit and clearly didnt need more debt. We complaint earlier this year and the company rejected the complaint. We then escalated to the financial ombudsman.

The Financial Ombudsman has agreed that the credit card company DIDN''T make appropriate checks. They have upheld the part of the complaint relating to the last credit limit increase, but claim that the intial card opening and the first credit limit increase were affordable

We can agree that the initial lending decision was fair so we have accepted that part of the complaint, but we disagree that the first credit limit increase was appropriate.

My main concern is that in the financial ombudsman final response they have quoted mum's income at the time of the application ( £13000/£975 per month). The investigator has then gone to show that the first increase was affordable BUT to do this, he has included all of the money that was going into their joint account - this includes my late father's pension income and attendance allowance. Mum's credit card was solely in her name and dad had no part in it.

It seems unfair that the ombudsman investigator would confirm that mum was on an income of £975 per month and then quote the total household income figure in his affordability calculation. Dad has since passed so this income is no longer available.

Had the investigator used mums income, his calculation would have shown a deficit and a clear indication that the increase was not affordable.

Does anyone have any advice?

What would the minimum payment be on £2450?

it sounds affording paper even if not in reality x x

It was quite high interest so I think it was about £105

Are they claiming her outgoings would have been lower given they would have been shared with your father?

Hi, they haven't said that specifically. The investigator starts off by confirming her income as 13k/975 per month and then goes on to say that the total income into the account was 2100 and that mum should have had £850 spare! it doesn't make sense.

Here is a copy of the info. You can't identify mum from this, so I think it's ok to post -

At the time of application, you confirmed you were working full time with an annual income of £13,000, which equated to £975 net monthly income. Using their internal processes, NewDay estimated £408.16 as your monthly living costs. No housing costs were declared and the checks didn’t reveal any current credit commitments. After deducting your expenses, you were left with a net disposable income of £566.84.

and then in the same letter....

Income verification
I’ve firstly reviewed your income received into the account this remains consistent throughout the months at around £2,100.
Expenditure assessment
I’ve calculated your committed expenditure in the form of direct debits to be around £822 – this does fluctuate slightly due to the nature of direct debits, this includes household utilities, loan and insurances.
I’d estimate your food transactions – (Tesco, Asda etc) to be on average around £430 this also includes petrol costs as I can see pay at pump transactions at Tesco.
Overall, I think if NewDay had completed an expenditure assessment they would’ve calculated you ought to reasonably have enough remaining to service this increase. I say this because a £2,450 limit, if fully used, would generate a reasonable monthly repayment of
around £122 each month. Based on the committed expenditure and estimated food/travel costs you ought to have around £850 disposable income remaining each month which could be used to repay this lending. The current account balance is in a comfortable credit position with no evidence of financial difficulty.

Dad's income was around £1300 so you can see that she wasn't really in a good position at all.

Credit cards are always in a single name aren’t they? I think it sounds reasonable to take the household situation into account as your credit file is linked to your spouse or whoever you have financial connections with, so it’s going to be factored in somehow. When did your dad pass away though? Was it in the period of the FOS’s calculations? You could respond back on those grounds.

Why don’t you think your mum should take responsibility for accepting the credit limit increases generally though? Is there any kind of incapacity or vulnerability at play and have you been explicit with them about that?

There have been rules in place about unsolicited credit limit increases and persistent debt etc since 2018. Did she not opt out of the increases or was she not able to understand for some reason? Lack of financial understanding can be classed as a vulnerability. Should there have been any vulnerability indicators that the credit card company should have picked up on when your mum applied?

www.fca.org.uk/firms/treating-vulnerable-consumers-fairly

@janettheplant your mum was working full time in a minimum wage job at 75?

Half minimum wage at £13K/year!

What’s the complaint? They shouldn’t have trusted the information she gave? So therefore she doesn’t have to pay back what she spent/owes?

she was drawing state pension and a tiny private pension

I am not getting into that - irresponsible lending is a real thing - have a look online. It makes up the bulk of FOS complaints.

We think that that she was on the edge of cognitive decline at that point. She was also caring for dad and not making the best decisions. She had taken out other cards that were maxed out - we feel that they should have been more vigilant. the FOS agree that their checks were inadequate

Put your complaint and their response into chat gpt with your first post here. It will unpick it for you and advise you how to respond, there is escalation and reconsideration possible with FOS

Sorry to hear this. Do you know how much your mum owed via her other borrowing, inc credit cards, at the point of the first credit increase? And has the ombudsman said if this credit increase would have been affordable even if the credit card company had taken account of your mum’s other borrowing at that point?

With affordability more generally, I imagine the ombudsman service is working on the basis that your mum only needed her income to service 50% of her household outgoings, with the other half paid by your dad. I appreciate your specific problem that the debt continued when your dad passed away, but his income stopped. You might be able to search the ombudsman decisions database to find other examples of where this scenario has been complained about. I imagine the credit card company would argue that it couldn’t have reasonably foreseen that your dad would pass away when he did, with the debt outstanding. But it’s hard to say without seeing all the details.

Can you prove that she has other credit cards that were maxed out? The fos say that there were no other credit cards in their respond so maybe that’s the angle to take.

Id she had other credit cards that were used up to the limit then how long as she had them for - is this a one-off or genuinely a pattern for her.

they’ll also be considering I would think if she was making payments at the time as that would indicate that it was affordable.

I think you might struggle with the affordability side unless they missed other debts when reviewing the application of increase to be fair.

but I do think you should pursue as vulnerability if she was declining mentally. What did the doctor say at the time? You mention that you think this was the time when she started to decline so presuming she saw a doctor - they’ll be able to support hopefully.

and worst case, if you can’t win, set up a repayment plan for the smallest amount they will allow if there’s still a balance. It will affect her credit score but I’m thinking that might not be an issue for her.

good luck x x

Don’t take legal or financial advice from ChatGPT. It’s a predictive language model. It makes things up based on what it thinks you expect it to say.

Does she have a diagnosed cognitive impairment?

what is the basis of your complaint and what would you consider a fair resolution?

Lots of people get in to trouble with credit cards - spending beyond their means. What makes your mum different