Having taken out a credit card with his bank, our client, ‘Barry’ suspected that he may have been a victim of irresponsible lending.
And he got more than he bargained for, as the bank not only refunded him for interest and fees he had paid on his card, but he also received nearly three times as much in compensation for five personal loans.
Our investigation led to Barry being awarded more than £6,000 in compensation for the money he was overcharged, but also more than £19,000 for the loans he had taken out and repaid in the past.
Barry felt that the credit facility he was granted by his bank may have been unaffordable, or inappropriate for his needs, and he contacted Barings Law’s Irresponsible Lending team.
His card was initially approved with a credit limit of £500 and had been settled. However, Barry says he missed a number of monthly payments and, on more than one occasion, exceeded the credit limit on his account.
Additionally, Barry felt he was put under pressure without being given reasonable time to clear his debt. He said he felt anxious on a constant basis due to the stress of wondering if he could make his next payment, and he struggled to meet his other outgoings, all of which had a detrimental effect on his health.
Our Irresponsible Lending experts looked at Barry’s circumstances. They examined the process used by his bank and why they saw fit to grant him credit, whether the financing was suitable for his needs and if the repayments were affordable.
We contacted Barry’s bank and outlined the reasons for claiming compensation on his behalf.
The legal argument regarding the credit card centred on three main areas – the creation of an unfair relationship, unsatisfactory creditworthiness and affordability risk assessments being carried out, and automatic credit limit increases.
Unfair relationship – We put it to the bank that they failed to establish Barry’s creditworthiness, which created an unfair relationship between bank and customer. They did not take reasonable steps to establish that it was suitable for their customer’s needs and circumstances.
Affordability – We challenged the bank’s assertion that they failed to determine that the customer had the ability to make his repayments without:
- Having to borrow funds
- Failing to make his other payments
- Suffering adverse impacts on his financial situation.
Barry didn’t believe that a credit check had been carried out prior to him being granted credit, which would have ensured affordability.
Credit limit increases – Regulations state that a company or business entering into a credit agreement with a customer must permit that customer, at any time, to reduce the credit limit and/or decline offers to increase their credit limit. Barry told our legal team that the infrequent limit increases on his card were made automatically.
Barry’s bank agreed to pay £3,952.34, which represented a refund on the interest and charges he had paid. They added simple interest at 8% to compensate him for the time he was deprived of those funds. After tax deducted at the basic rate, this totalled £2,638.50, meaning Barry’s refund on the credit card was £6,590.84.
However, during the bank’s investigation into their decision to award Barry credit, we had them look into the circumstances under which a total of 10 personal loans were approved.
While they believed that five of Barry’s loans had been correctly approved, they did uphold our complaint on the other five and agreed to make a payment.
The bank issued a payment of £9,882.97 as a refund of any interest and fees and a further £11,541.87, which represents interest at 8% for the time Barry was without that money. After tax was applied to the interest at the basic rate his award for the loans totalled £19,116.47.
Taking into account his credit card and loan refunds Barry, who made his claim using our quick-and-easy application form, was awarded a total of £25,707.31, and any adverse marks on his credit rating as a result of his bank’s irresponsible lending were removed.
* Amount awarded is before fees and disbursements
