Credit Card Application Ombudsman

leetabix

Dear fellow MSE forum users,

Simple question (although I've done a search on the internet and not yet found an answer to this): Who is the Ombudsman in the UK that deals with rejections for credit card applications?

I was refused an application to Amex a while back and according to the current guidelines, stating that the rejection is due to an internal score is considered a sufficient enough reason, even though the score is one that's calculated by the bank, on the bank's own criteria. Effectively this gets around the guidelines for the purposes it was originally intended for - to enable consumers to make better decisions/enable positive action about their financial situation. Instead, despite an excellent credit history (no missed/late payments etc.) and an external credit check pass, I have no information to go on what I can do to enable myself to be more financially responsible relative to the expectations of the bank who are offering the product. When I ask the bank about this, they refuse to go into more detail - hence, I'm looking to contact the Ombudsman to raise the issue this creates, and to suggest they update the guidelines to make it mandatory for the bank to provide an actionable main reason for a score (external or internal) failing to meet their criteria.

Technically, as a person getting refused from a financial institution for a credit card isn't yet a customer, this potentially leaves a gap in terms of which ombudsman covers this situation.

Any help appreciated, many thanks.

James

chattychappy

If its the credit card, then that is regulated by the OFT with the FOS as the ombudsman. As your complaint is more about general trading practices then perhaps the OFT is the correct target. The FOS usually just looks into specific complaints.

BUT, I really wouldn't expect any intervention in a matter like this.

If it's Amex chargecard, I suspect you have nowhere to go - but I need to check.

Tixy

The bank are perfectly entitled to refuse you as a customer - and they are not obliged to tell you exactly why. They are a commerical business who can choose who to have as their customers. If they told people exactly why they were refused this would open up the possibility for people to play the system.

I have no idea what you mean about 'an external credit check pass' as there is no such thing in the UK.

Just because you have no missed payments does not mean they consider you to be a low risk customer, some possible reasons you might have been rejected include
-maybe they think you have too much debt already compared to your income for their risk profiling
-maybe they think you have too much debt plus available credit on existing accounts compared to your income for their risk profiling
-maybe they think you have a high number of existing credit accounts for their risk profiling
-maybe you are financially associated with someone who has issues on their credit file
-maybe they think there are signs of financial instability on your application (these include short time at current address, short time in employment, not -providing a landline number, working in an industry they consider to be at a higher risk of redundancy and all sorts of other things).
- maybe they think you've applied a lot of credit products recently and consider that to make you a higher risk.

You can choose to appeal a decline with the bank involved - if they still decline your application that is absolutely their right.

leetabix

Tixy wrote: »

The bank are perfectly entitled to refuse you as a customer - and they are not obliged to tell you exactly why. They are a commerical business who can choose who to have as their customers. If they told people exactly why they were refused this would open up the possibility for people to play the system.

I have no idea what you mean about 'an external credit check pass' as there is no such thing in the UK.

Just because you have no missed payments does not mean they consider you to be a low risk customer, some possible reasons you might have been rejected include
-maybe they think you have too much debt already compared to your income for their risk profiling
-maybe they think you have too much debt plus available credit on existing accounts compared to your income for their risk profiling
-maybe they think you have a high number of existing credit accounts for their risk profiling
-maybe you are financially associated with someone who has issues on their credit file
-maybe they think there are signs of financial instability on your application (these include short time at current address, short time in employment, not -providing a landline number, working in an industry they consider to be at a higher risk of redundancy and all sorts of other things).
- maybe they think you've applied a lot of credit products recently and consider that to make you a higher risk.

You can choose to appeal a decline with the bank involved - if they still decline your application that is absolutely their right.

Sorry but I think you might've missed the point of my thread - it was to ask for the Ombudsman that would deal with suggestions in altering the customer experience in this kind of situation (I stress, suggestions - not a complaint as the bank haven't outside of guidelines technically), rather than a request for an opinion on the actions of the bank.

However, to address your notes:

- Yes, they're entitled to refuse me as a customer (I didn't dispute this).

- They have to provide a reason for refusal under the 'Guide to Credit Scoring 2000' document, of which Amex noted they were agreeing/adhering to with my communications to them (which they rightly are). However, depends on what you mean as 'specific reason' - they don't have to tell me which bit of a credit score provided the largest negative bias which contributed the most towards the score failing, for example. Depends on your context of granularity really - and that's exactly why I wanted to raise this as a suggestion to the Ombudsman, in which to clarify the level of granularity required to make the process helpful to a potential customer in enabling them to improve their financial situation with the information required, where possible/reasonable.

- Whether introducing my suggestions to the Ombudsman as an amendment to the 'Guide to Credit Scoring 2000' or related legal document, depends on how it's implimented. That would be a topic of discussion in of itself, and I fully agree that releasing some kinds of information would indeed enable people to comitt fraud, but I don't think that every piece of information that could be useful to a customer would allow them to 'play the system.' Happy to open this up to this topic after I get my main answer as noted above.

- By 'external credit check pass' I meant the process of the financial institution consulting with a non-business entity (i.e. Experiean/Equifax etc., who are 3rd parties and hence the 'external' part of the phrase) on the subject of assessing whether the applicant for a product/service is eligible to receive credit from the aforementioned financial institution (hence the 'credit check' term used - a 'pass' would be the process of the 3rd party/external entity providing a report of some kind to the financial institution, and the financial institution using an arbitrary set of criteria against the report as a metric for determining a 'pass/fail' result - I jus summed this up as 'pass' however). Hopefully that details what I mean by 'an external credit check pass.' Therefore, by explaining the above, and the context of my phrase, hopefully you can now be in agreement with me that there is indeed this inter-business consultation process happening in the UK.

- Hopefully the above response in clarifying what I meant by 'an external credit credit check pass' then enlightens as to what my responses would be to your list of points noting reasons why I might've failed, as I noted that I passed this procedure, and hence this automatically means that the process of the external credit check was of satisfactory quality to the financial institution to merit me obtaining their product - it was the internal checks they did which resulted in my application being rejected (this would be harder to define in terms of information contained on typical internal checks financial institutions conduct - best to read the MSE guide Martin/staff have compiled on credit checks for clarity, but I can go further into detail if you require).

However, I will note my particular personal sitution in light of the above potential suggestions, just to give a clearer picture of my personal situation (not that it has any bearing on the initial topic of the thread, but I'm just giving people more of an insight here):

- I don't have any debt with the exception of a student loan, which the bank wouldn't have light of (doesn't appear on experian etc. credit reports) so this effectively could be summarised as 'I have no debts.'

- The debt response I gave above, as for the credit, I had £200 credit available (although I never used this overdraft) on a bank current account, and my mobile phone contract was the other credit amount, varying each month but typically being around £35-40 each month. I also have a corporate charge card in my name, with no credit limit (hence it being a charge rather than credit card). This doesn't appear on any credit reports even though technically a charge card is a 30 day credit card with no credit limit, but is treated as no credit, as there's no actual amount to quantify any creditworthiness. So to summarise, I have a bit of credit, but not much.

- 2 credit accounts (current account overdraft and mobile phone monthly contract for a 18 month period as summarised above), so again to summarise - not many credit accounts, in comparison to what would be expected for an average consumer.

- Just me on the finances, no joint accounts.

- 27 years at current residence (i.e. all my life), 3 years in current full-time employment with IBM (i.e. low risk of redundancy being in the private IT sector which has been in existence for 100 years, and turns over $100 billion a year - perhaps they're using another metric I'm not aware of however IT Consulting is very lucrative at the moment and I'm not aware of any redundancies in any company doing it in the UK at the moment). Landline number included on application. Also on the electorial roll.

- Have only made one application in that financial year (and the year in general, given 12 months of no activity prior to the aforementioned application).

Hopefully that clarifies my position and answers all of your points suitably.

However, if someone can point me towards the Ombudsman that covers this area then that'd be great

P.S If it's easier, think of it in the context of 'what would James do if the company was refusing to give any reason for credit application refusal, contrary to the Guide to Credit Scoring 2000 document, and being one of the signatory bodies noting compliance with the guidelines?'

Thanks all.

leetabix

chattychappy wrote: »

If its the credit card, then that is regulated by the OFT with the FOS as the ombudsman. As your complaint is more about general trading practices then perhaps the OFT is the correct target. The FOS usually just looks into specific complaints.

BUT, I really wouldn't expect any intervention in a matter like this.

If it's Amex chargecard, I suspect you have nowhere to go - but I need to check.

Great stuff, exactly the kind of thing I'm looking for!

The FCA transition board is currently looking at this after some consultation I had with them, (specifically Neil Dhot, who's in charge of the Financial Conduct Authority Approach Document for the transition between the FSA and FSA bodies). But I thought after many years of using this site as a wealth of finance-related information, that someone more knowledgeable than me might know of another body whose remit also covers this area, so I could tackle this from more than one front. But yes, good stuff!

As an aside, if you also think of this situation in terms of creating a financial responsibility for the financial institution, then it might make more sense for it to be considered a consumer issue. I.e. A bank refuses your application for a current account, yet refuses to say why you didn't meet its internal criteria but you're wondering why as you have a spotless credit record.

The bank could be refusing you because it knows you're unlikely to go into overdraft and unlikely to incur any charges/fees, and therefore the bank is acting itself in a financially irresponsible way by feasibly moulding its internal criteria such as to take on only customers who're high enough risk to incur some charges/fees/interest etc., but not too high that the bank would lose out from an eventual default. The absence of the requirement for a specific reason for a credit application refusal enables banks to act in a financially irresponsible manner without some check to ensure that they're not masking the aforementioned behaviour.

One way to get around Tixy's comment on banks enabling people to 'play the system' whilst still ensuring financial responsibility, is for the financial instiution to be able to refuse you in the same way as they are now, but in the event of an appeal to the bank being denied, an additional final appeal would involve the bank/financial institution disclosing the main/specific reason of refusal that contributed most to the rejection decision to the Ombudsman, but not disclose it to the applicant. The Ombudsman can review it and determine whether the bank acting in a financially irresponsible manner (and thereby punishing the applicant for being financially responsible), or whether it was completely justified to refuse the applicant.

Remember that the role of the Ombudsman is to regulate financial instiutions by forcing them to adhere to regulations that the financial institutions themselves wouldn't adhere to in the event of the Ombudsman not existing, to the benefit of the consumer and the detriment of the financial institution. Hopefully then, you can see the merit of the above potentially being introducted.

jackjones01

I would just accept the fact you was declined.

leetabix

jackjones01 wrote: »

I would just accept the fact you was declined.

Have you not read the above posts jack? Your response seems to be in complete contradiction to the thread topic - I *did* accept that it was declined - the topic isn't about that. It's about finding out which bodies regulate this area, in the way I've highlighted to the FCA (who have themselves recognised that this is an issue). This is a consumer forum, and this is a consumer issue - if you disagree please provide reasoned points why a) it isn't a consumer issue and b) if a consumer issue, why as a member of a consumer forum, you think it would be in a consumer's interest not to want to change a consumer issue?

opinions4u

leetabix wrote: »

Have you not read the above posts jack? Your response seems to be in complete contradiction to the thread topic - I *did* accept that it was declined - the topic isn't about that. It's about finding out which bodies regulate this area, in the way I've highlighted to the FCA (who have themselves recognised that this is an issue). This is a consumer forum, and this is a consumer issue - if you disagree please provide reasoned points why a) it isn't a consumer issue and b) if a consumer issue, why as a member of a consumer forum, you think it would be in a consumer's interest not to want to change a consumer issue?

The FOS cannot compel a bank to reverse a commercial decision. The FOS is also a complaints body, not a regulator.

The card company have met their obligation to give you a reason. But there is quite rightly no requirement for them to provide you with information that would enable you to cheat their systems.

So I'm in the "accept it, get over it and find something more important to worry about camp".

Tixy

leetabix wrote: »

One way to get around Tixy's comment on banks enabling people to 'play the system' whilst still ensuring financial responsibility, is for the financial instiution to be able to refuse you in the same way as they are now, but in the event of an appeal to the bank being denied, an additional final appeal would involve the bank/financial institution disclosing the main/specific reason of refusal that contributed most to the rejection decision to the Ombudsman, but not disclose it to the applicant. The Ombudsman can review it and determine whether the bank acting in a financially irresponsible manner (and thereby punishing the applicant for being financially responsible), or whether it was completely justified to refuse the applicant.

And who would pay for the substantial cost the administration would incur? the bank? why would they if they've done nothing wrong? the declined applicant? I doubt they'd be willing to? the tax payer? why should they?

leetabix wrote: »

The bank could be refusing you because it knows you're unlikely to go into overdraft and unlikely to incur any charges/fees, and therefore the bank is acting itself in a financially irresponsible way by feasibly moulding its internal criteria such as to take on only customers who're high enough risk to incur some charges/fees/interest etc., but not too high that the bank would lose out from an eventual default. The absence of the requirement for a specific reason for a credit application refusal enables banks to act in a financially irresponsible manner without some check to ensure that they're not masking the aforementioned behaviour.

The banks are perfectly entitled to refuse someone because they don't think they'd be profitable. Its unlikely in the event of a credit card because of the transaction fees generated with every purchase made but sure, they are going to choose customers who will make them a profit - they are a business.

PS - and not the point of your thread I realise - but I'd guess that you may well have been declined by amex due to your very small amount of credit history for them to assess.

izools

leetabix wrote: »

- 2 credit accounts (current account overdraft and mobile phone monthly contract for a 18 month period as summarised above), so again to summarise - not many credit accounts, in comparison to what would be expected for an average consumer

These aren't credit agreements.

Sure, they appear on your credit file but neither are credit agreements regulated by the Consumer Credit Act 1974.

Therefore, you have no history - or evidence - on your credit file to demonstrate how you will handle a "proper" credit agreement - I.e. one that is created as per the terms in the CCA 1974.

An overdraft is repayable on demand, and a mobile account is a 30-day account - the balance must be repaid in full each month - there is no credit facility, credit limit, or credit terms.

Therefore, AMEX were right to decline you.

You, just like everyone else in this country must prove themselves to be credit worthy by using easier-to-get credit accounts like a store card or Capital One Progress card - once you've run an account or two like this for a couple of years you'll have built up sufficient credit history for a prime lender to take an application from you more seriously.

In answer to your original question the "body" who regulate acceptance criteria are the creditors themselves. They are private enterprises offering up their and their investor's money to those who's applications they deem acceptable. They are free and open to create whatever criteria they want and change it as and when they please.

They will not expand on the matter of "failed credit score". The reasons for this are two fold:

1. This is business sensitive data which can be used to manipulate application forms to sway decision making systems - exposing lenders to manipulation by those who may not repay.

2. The criteria for analysing an application and creating a "score" is such that no one reason, or aspect of the application, can be picked out as a "cause" for the decline.

Points are awarded or subtracted for several areas:

Income
Expenditure
Time with employer
Time at address
Time with bank
Current total available credit
Current total debt levels
Occupation
Marital status
Residential status
(etc)

Applicant B may have missed a few repayments in the past but be approved and applicant A may have never missed a payment but be declined.

Perhaps Applicant B has been with their employer, bank, and at their address for a very long time, is married, and has a high income but Applicant A has recently moved and changed banks, is recently divorced, and has taken a pay cut.

No one reason has generated a low score or a pass / fail. But even if one reason were to blame, the creditor cannot lay this out to the applicant for the points raised above.

The other side to credit scoring is what is known as "neural net" scoring. This is whereby the computer running credit checks is given a model not for the criteria to score people on, but is given a few examples of existing accounts which are run in the way the creditor wants new applicants to run their accounts.

The neural net scoring model then looks at all the existing customer accounts that are run in this fashion. It calculates what type of data entered onto an application form is most likely to be that which generates account conduct of this type. It does this by looking back at the application data provided by existing customers when they applied.

As account conduct for existing customers change month on month, the criteria fed back into this form of credit scoring system also can change month on month. Due to this fact and the fact that there is no human intervention involved in the scoring aspect of this type of system, a creditor rejecting an applicant scored in this way cannot provide them with a reason more "precise" than "Failed to meet criteria" or "Failed to meet credit score" as the criteria is not decided by a human and in many cases (I.e. Lloyds TSB) not known by a human, either.

I hope this goes some way to explaining why the answers given so far in this thread are what they are.

FullTimeBadMan

Sore, much?