Beware - Your Card limit may reduce suddenly

Dylanwing · 21 May 2007 at 6:06PM

I have had a card with Sainsburys for many years, and at the end of last year, I paid in a large sum of money, and as if by magic, my limit reduced leaving me about £15 to spend. I complained, asked many pertinent questions, but they stood firm, and were a bit evasive.
This Month, I made a further deposit, and once again, my limit reduced with little leeway. On saturday I enquired and got a BS story, today, the cat was let out of the bag. Each Month, 4,000 'undesirable' accounts are automatically checked, and if the balance has reduced, the limit is reduced to match the balance as close as possible. So, if Sainsburys do this, is it common practice across all HBOS and subsidiaries?
Needless to say, I have written to the Chief Exec (As if he will read it!) asking a lot of awkward questions, but this really strikes me as highly unethical. Surely the limit is effectively being withdrawn at the time of the first search? What happens if money is paid in for a specific purpose and that person has made a binding financial committment, when the limit is removed? It nearly happened to me, but I bought my car just ahead of search date, thankfully. Why are customers not advised and offered a low-interest loan? To me, the whole practice really stinks, is dishonest and highly unethical. Do you agree? Can anyone shed any further light on this? Any ideas for tips in challenging the Bank? Is it worth involving the Ombudsman if it is not resolved satisfactorily? All thought welcome!
Be warned!
Oh, and if you wonder about my credit rating, I recently took an unsecured loan with minimum fuss and was told my rating was 'Excellent'. Sainsburys seem to rate me as 'Sub-Human'. You choose!

andipandi_2 · 21 May 2007 at 6:50PM

i've had my AMEX card reduced from £2800 to £700,i think it is because i settled £3250 on Cap1 and MBNA for a total of £985 which has affected my credit rating ,they were registered as partial settlement.

jamalfatty · 21 May 2007 at 8:04PM

You dont have a right to this credit so if they want to reduce it then afraid its tough, and complaining wont do any good. If your really that unhappy about it then vote with your feet.
As to it being unethical, if anything its the opposite, they obviously had some concerns with the level of credit they were extending to you, so from their point of view, is the best thing to leave you potentially over-committed, or reduce it to minimise the risk?

Dylanwing · 21 May 2007 at 8:18PM

Jamal - I think you miss the point. I agree that I have no right to the credit, but do I not have a right to honesty? It is not just a random check, but a secret Monthly check, and a reduction to allow you no spare balance. If they are so concerned, surely they should withdraw the facility and offer a loan at generous terms, to help both parties? What if I had paid in for a specific commitment, and found the facility withdrawn? My limit was reduced in February (£5850 to £3450) and I was assured that future credits would not affect future reviews, and even when I paid in, I was told that my limit was not due for review and would not be reduced. - 3 Months later and it goes from £3450 to £450. I am paying for a revolving credit facility, a credit card that never has spending power is as much use as a chocolate teapot and should not atract such high interest rates. I agree with responsible lending, but I dislike being lied to. What if I had paid in because I was going abroad and wanted to pay for hotels etc?

jamalfatty · 21 May 2007 at 8:30PM

There's two sides to this and no right answer, if you are relying on being able to use that credit facility for a very important purchase then perhaps you may be over-committed (dont neccesarily mean you - could be the case that their historical data tells them this is usually the case).

As to offering you a loan at reduced rates - rates are priced according to risk, so if they see fit to reduce your limit, this means they see some sort of risk in lending to you (no idea what, only they would know) so a loan at reduced APR's may be unlikely to be offered to you.

As to the BS story, I would take that with a pinch of salt, yes they probably review account regularly and reduce/increase limits accordingly, but as to the amount of accounts you have been told, doubt the person you spoke to would be privy to that information in first place, and then what happens if they have 8000 accounts showing signs of stress, they leave half of them?

And the finally, when you signed up for this account, there would have been a section in the T&C that allows them to regularly review your account and reprice it as they see fit, if that causes problems as in your case then thats unfortunately the risk you take with relying on credit.

Dont get me wrong, if it happened to me i'd be kicking up a right stinker too, but they do it for a reason, even if it is to your detriment at the time

Dylanwing · 21 May 2007 at 8:35PM

I would also add that the new limit is not tailored to need. It is balance + interest due, then round up to nearest multiple of £50. All 4,000 victims automatically checked Monthly - Secretly. Is that really fair or ethical?

Dylanwing · 21 May 2007 at 8:49PM

Jamal - Sorry to go on, but amidst the untruths from Sainsburys, I believe that the Monthly limit review is true. I was given a very bizarre tale on Saturday and promised full limit re-instatement, but when I called today I suggested I had been lied to, she got flustered and told me exactly what the 'Management Note' on my file said (Allegedly, of course!). Lets just say that it explains an awful lot, and fits in with events and discussions with staff previously. I can live with the limit cut, I object to the manner of it and the lies - And until I phoned I was not advised and do not like having my card rejected!

jamalfatty · 21 May 2007 at 8:51PM

Your not secretly checked though, you agreed for them to do this when you opened account. And if they've reduced your limit because of risk then that sounds about right that they have left you with virtually nil credit available.

No its not fair, wouldnt say its unethical though, its the way credit works unfortunately.

jamalfatty · 21 May 2007 at 8:55PM

I had quite a lengthy debate on this on another thead with someone, there is not a single credit card company that will advise you they are going to reduce your limit before they actually do it if it is being reduced because of risk - this would be incredibly foolish of them and bad business.

I'm not disputing that they review accounts monthly, probably more often than that, just that I wouldnt take what the frontline staff tell you as gospel when they start divulging business information like how many accounts they review/how often etc.

smithja · 22 May 2007 at 6:30AM

Hi, Barclaycard are doing the exactly the same thing there are a few posts about it. My limit went from £3500 to £260 before I got my very first statement. They put it back up though, so it is worth pursuing it. I also got various stories before i could get in contact with complaints (I found out late on a Friday), I decided since they were all different to ignore them and wait and see, and it was put back up. Hope you get it sorted soon.

James

peawack · 22 May 2007 at 8:37AM

I completely agree with the OP. They are continually moving the goalposts, and customers who are not necessarily financially stretched can be considerably inconvenienced by these sly tactics.

Beware - Your Card limit may reduce suddenly

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