Our client ‘Tania’ contacted Barings Law as she believed she had been the victim of irresponsible lending by her bank and a credit card provider.
Our legal teams won Tania compensation payments from the bank and card supplier, totalling more than £6,000.
Tania applied for, and was given, a credit card with her bank, initially with a limit of just £200. She intended to use the credit to pay for home improvements. However, the credit limit on her card was automatically increased on several occasions and her outstanding balance eventually reached a total exceeding £2,300.
She says the bank did inform her of the credit limit changes but she exceeded the limit a number of times.
The repeated limit increases on her account, compounding by mounting interest, led to Tania enduring sleepless nights worrying about the debts, and the rise in minimum monthly payments she was struggling to meet. She did miss making payments on more than one occasion and making the payments meant that she struggled to meet her other regular outgoings. Tania also lost her job and after an assessment had been classed as unable to work on medical grounds for almost a year.
Tania had to borrow money from elsewhere to keep up with the payments on the card. She says the worry of her debt had a negative effect on her mental health as she was constantly worried about how she would meet all of her increasing outgoings.
Our Irresponsible Lending department took on Tania’s case and approached her finance providers on her behalf.
The complaint we put to Tania’s bank centred around three main aspects – the creation of an unfair relationship, insufficient creditworthiness checks being carried out and credit limit increases that served to compound their customer’s debt and add to her stress levels.
- Unfair Relationship
We argued that the bank failed to establish that the credit agreement was suitable for the customer, and they did not take reasonable steps to ensure that the agreement was appropriate for Tania’s needs and circumstances. This resulted in an unfair relationship being created. - Unsatisfactory creditworthiness and affordability risk assessment
Banks, finance providers and lenders are required to consider a customer’s ability to make their repayments. They must also consider a customer’s ability to make the repayments with having to borrow further funds, without failing to keep up with their other payments they are obligated to make, and without the repayments having a significant adverse effect on their financial situation. We alleged that this did not happen and little to no creditworthiness checks took place that would have showed the repayments to be unsustainable for Tania. - Credit Limit Increases
A credit agreement must allow a customer the facility to reduce their credit limit, or decline offers to increase that limit. The customer must also be permitted to decline receiving offers to increase their limits. The customer was only informed of changes to her credit limit once they had been applied. Furthermore, the bank will have been aware that Tania had exceeded her credit limit and missed payments on a number of occasions, which they should have recognised as their customer experiencing financial difficulties or hardship.
In admitting liability the bank agreed to repay Tania £2,816.23 to cover the interest applied to her account that she was charged for and £3,280.34 to cover the time that she did not have this money. Simple interest of 8% was applied to those awards.
The bank also agreed to remove any adverse information that had been recorded on Tania’s credit file as a result of the irresponsible lending.
Barings Law also prepared a claim on Tania’s behalf for a store card that she took out with a different credit provider.
The card also had a £200 limit initially but, by the time she contacted Barings Law’s legal experts, the outstanding balance had reached £500.
Tania also exceeded the limit on that card on more than one occasion. Due to her ill health she was struggling to meet the repayments as well as keep up with her other monthly outgoings and a number of payments were either late or not made at all.
Barings Law approached the second card provider and negotiated a settlement with them. The defendant agreed to make a compensation payment of £208.41 to Tania. This represented a partial offer to refund all interest and associated fees and is broken down as:
· Fees: £60
· Contractual Interest: £141.13
· Statutory interest at 8%: £9.10
· Tax at 20%: £1.82.
The store card provider also agreed to amend any adverse information from Tania’s credit file.
*Amount awarded is before fees and disbursements.
