Millions due refunds on unaffordable credit cards – are you owed compensation?
MILLIONS could be due refunds on unaffordable credit cards – and may get compensation.
As customer complaints soar, Harriet Cooke takes a look at who is owed cash.
WHAT’S HAPPENING?
LENDERS have a responsibility to check whether a borrower can afford to pay back credit before handing it out.
The Financial Conduct Authority brought in rules in 2018 requiring credit card providers to contact customers if they have paid more in interest and charges than their debt over the past 18 months.
More than 13,000 complaints were made to the Financial Ombudsman Service about credit card providers lending irresponsibly in the last financial year, up a staggering 264 per cent per cent on the previous 12 months.
The FOS has upheld 45 per cent of the objections it has so far resolved on the problem of irresponsible credit card lending in the year up until April.
Claims management firms targeting borrowers are partly the cause of the rise in complaints.
The majority were about firms’ decisions to provide credit or increasing the credit limit without carrying out proper checks for affordability, and sometimes both.
WHO COULD CLAIM?
AROUND 34million consumers — 64 per cent — have at least one credit card, with the average balance at £1,780, according to the analytics firm Fico.
If you pay the full amount back each month at the end of the billing period, you will not owe any more than what you have borrowed.
But almost half of outstanding balances are incurring interest, the trade body UK Finance has reported, with the average annual rate now at 21.28 per cent.
If you believe you were given a credit card that was unaffordable or had a high spending limit then you may be able to claim.
Even if you have paid the credit card back and closed the account, you can still claim.
Adam Butler, of the debt charity StepChange, said: “The ombudsman cases show firms often aren’t looking hard enough at whether people can repay without experiencing difficulty.
“It’s too easy to take on multiple credit cards and for the limits on those cards to drift higher as customers spend more, drawing them into difficulty.”
HOW MUCH COULD YOU GET?
YOU will not get everything back.
The ombudsman usually orders firms to repay the interest paid by the customers, any extra charges, plus eight per cent on top.
You still need to repay anything you have borrowed.
For example, a customer who earned £27,500 a year applied for a credit card.
It was approved with a £250 limit but then gradually increased to £1,500 over the space of two years.
The lender said it carried out checks but the customer complained and the ombudsman ruled it should not have increased over a certain limit.
The bank was ordered to repay all interest, fees and charges above £600.
In extreme cases of irresponsible lending, the entire debt could be written off, says Liz Hunter, director at Money Expert.
HOW TO MAKE A COMPLAINT
FIRST, complain to your lender in writing.
Citizens Advice provides a free letter template to get you started.
If the lender does not get back to you in eight weeks, or if you are unhappy with the response or do not hear back, get in touch with the Financial Ombudsman Service straight away.
They will need to know basic personal information, what the problem is and how you want it to be solved, along with details of the policy or account the complaint relates to.
If the investigator decides you have been treated unfairly, you might get compensation.
They may also order your lender to remove any negative records on your credit file relating to the account.
They should also remove any negative records on your credit file.
ENERGY DEALS AXED
THE best fixed-energy deals are starting to disappear ahead of bills rising this winter.
Several suppliers, including Outfox The Market and EDF, have withdrawn their cheapest fixed-rate offers this week.
The energy price cap is expected to rise by £155 to £1,723 a year from October, up from £1,568, according to analysis firm Cornwall Insight.
British Gas, Octopus Energy, and Co-Op Energy have also increased the cost of their fixed tariffs, says comparison site Uswitch.
The best deals are now between £7 and £103 more expensive.
Suppliers often adjust or remove fixed-rate tariffs due to fluctuating wholesale market conditions.
Despite this, some bargains remain available.
For example, Outfox The Market is currently offering the cheapest deal on the open market to new and existing customers.
Its Fix’d Dual Aug24 v2.0 tariff costs a typical household £1,564 a year.
This means it is £4 cheaper than Ofgem’s current price cap and £159 less than the forecasted cap from October.
This comes with a £25 exit fee per fuel, or £50 if you lock in with a dual-fuel tariff.
Elise Melville, energy expert at uswitch.com, said: “It’s important to prepare now for future price rises and consider locking in rates while there are competitive deals to choose from, as deals could get more expensive over winter.”
JAMES FLANDERS
BROADBAND ‘RIP-OFF’ WARNING
MILLIONS of households are facing a huge broadband “rip-off”.
Customers could be paying up to £100 a year more for “superfast” internet that is actually ten times SLOWER than the fastest deals on offer, analysis by The Sun has found.
Broadband firms often bamboozle customers with confusing and complex names for their products.
Most households connected to Openreach’s network are promised “superfast” internet.
But they often experience significantly lower speeds compared to the best connections.
In contrast, homes with “full fibre” or Virgin Media connections enjoy speeds up to ten times faster for the same cost.
Ofcom, the telecoms watchdog, states that 97 per cent of UK households have access to superfast broadband, yet speeds can vary widely.
Sabrina Hoque, telecoms expert at Uswitch, says: “Unfortunately, it can be a lottery based on which type of broadband is available to your premises.”
Slower speeds do not guarantee cheaper prices.
For example, a 24-month contract with speeds between 30Mbps and 60Mbps costs £24.09 a month on average, while a tariff with speeds between 100Mbps and 500Mbps is £22.58 a month, according to Uswitch.
But Alex Tofts, a broadband expert at Broadband Genie, said others could be “ripped off and left spending up to £100 more for slower connections”.
Virgin Media’s entry-level M125 fibre broadband deal offers 130Mbps speeds and costs £26 a month. But it is only available to 54 per cent of the UK.
That means those who are unable to access it are limited to firms using the Openreach network.
One of the most popular deals from BT, with speeds up to 50Mpbs, costs £29.99 a month over 24 months direct from the telecom giant.
Compared to Virgin’s deal, a customer would end up paying £100 more and receive slower speeds under BT’s offer, just because of where they live.
BT declined to comment.
From September 16, new guidance will require broadband providers to offer clear, easy-to-understand descriptions of their services.
JAMES FLANDERS