Credit Card Application Ombudsman

BoGoF

Would you be as keen to go to the FOS if you had to pay a £500 fee to have your case reviewed.....didn't think so.

In this case there is nothing to the FOS to rule on, they don't want your business end of.

stclair

http://www.youtube.com/watch?v=WOdjCb4LwQY

leetabix

opinions4u wrote: »

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".

I think this is someone else who doesn't quite seem to get the context of my original (and subsequent posts).

Firstly, I think your note about the FOS is related to chattychappy's comment - was grateful for the post as the reply was the first that was made in the context of my original post, and also pointed me towards a potential link with the OFT.

Secondly, I never complained/noted that I was displeased with the financial institution's decision, or alleged that it was unlawful - and this is the second time I've had to re-literate this on the thread, so perhaps my posts are unclear? Feedback would be good on this - however I think I noted it pretty clearly below:

leetabix wrote:

- 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)

.

Lastly, I don't think that's a very positive (or in fact useful or friendly) attitude to have towards my post - even if it was about my complaining about being rejected for a credit card application (which it isn't), then you're implying that instead of lobbying for a change to legislation, you're quite happy for the law to be as it is now and forever more, and that the current legal framework is completely perfect. The only other way to take the comment is that instead of lobbying to change legislation like this, that other issues should be prioritised instead of the one I noted on this thread. In that case, you would need other issues to then be able to compare this one against, and none other have been provided on this comment, so it's a pretty empty logical argument unless you put context/comparison to it - and even then, it would still be your opinion vs. mine if they indeed differed, and that would then be the topic of another thread for discussing that opinion, instead of the one I created this thread for.

leetabix

Tixy wrote: »

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?



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.

On your first comment, completely valid point of discussion - but again, not what this thread is for. I do reckon it would be a discussion worth having though - currently tax payers pay in part for industry regulators to operate. To look at the largest scale of the situation, all tax money by definition is taken involuntarily, and it's the elected government that then decide how that tax is distributed in terms of government spend. How do we decide where it gets spent? Essentially it's who you vote for on the day of national elections when it boils down to it. When you go down to the level of granularity of how regulators regulate the industry, then again you have a valid point - should regulators be doing a/b/c but not x/y/z when they all have advantages and disadvantages? For instance (to take a large scale/clear cut issue), I see the reason behind the PPI reclaiming activities being undertaken by the regulators. Am I affected by it? No. Does my tax payer's money go towards paying in part for these activities regardless? Yes. Do I have a personal leaning towards a pro/anti stance? Not really...but you might/might not. Does it make your/my opinion right? No. Hence it's all up for debate and discussion, with a conclusion following the democratic system of majority rule.

I'd actually be interested to see what bank issues people have that aren't regulated, and see what the new FCA is going to be doing, and if it represents the public interest. Maybe my suggestion won't get adopted - but at least it'll have gone through the process and most people would then think 'no, let's tackle another regulatory area instead for the moment.'

On your second point - this is where the idea of a regulator comes in. A business' purpose is to make money, within the confines of the law. So, they'll do anything and everything they can to make money - makes perfect sense! But, the regulator exists to represent the consumer interest (and hey, this is the core of what Martin Lewis and MSE are all about right?!) which runs contradictory to the aim of the business to make money by all legal means possible, including ways which give a negative consumer experience. So, regulators exist in essence to introduce leglislation in the interest of consumers against the interest of business', and hence why I completely agree with you in terms of what the current legislation allows, but also hold the opinion that the system should be amended for the detriment of the business towards the benefit of the consumer, but of course while considering the very valid concern of potential fraud (an issue which needs discussion in itself as I mentioned earlier in the thread).

On the P.S note - valid point, you may well be right.

leetabix

izools wrote: »

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.

Thanks for the note about the credit agreements there - didn't know that, could explain things! And also thanks for the more detailed description on credit assessment, I also didn't know some of the information listed here. However, as you rightly note - it's the banks that set the criteria + don't have to divulge to any party how it's operated, and it's unregulated - and that's the area that I'm working with Neil on in offering suggestions on introducing some form of regulation in this area.

I accept that a bank might say/reason that no one item produced a refusal of credit, however I can't quite see how the system wouldn't be improved by the FCA introducing regulation such that a final appeal can be made to the FOS who are told the reason/s for credit refusal (as noted earlier in another reply - the applicant will never see these reasons and only the FOS will, so that immediately negates the issue of an applicant using the information to 'play the system.' The only issue that then remains is 'who'll pay for the additional admin/staff/man hours required to conduct these manual reviews?' And that's a completely valid question! Just again, one that's outside the scope of the question I originally asked on this thread.

But yes, thanks for the information on credit scoring, very interesting! Do you work in finance yourself?

leetabix

FullTimeBadMan wrote: »

Sore, much?

I only find myself having to write lots when people seem to miss the point of my original post and I have to clarify things...without meaning to be rude, if they understood what I was originally asking for then I wouldn't have had to write war and peace with added running commentary.

Unfortunately people keep thinking that I'm complaining about my initial rejected application for credit with Amex (which I'm not). I'm just asking for the bodies related to the area of credit applications that deal with regulations so I can make some suggestions to them to make the process more consumer friendly (i.e. the FCA).

leetabix

BoGoF wrote: »

Would you be as keen to go to the FOS if you had to pay a £500 fee to have your case reviewed.....didn't think so.

In this case there is nothing to the FOS to rule on, they don't want your business end of.

Where did I mention the FOS? I'm asking people which regulatory bodies deal with this process (i.e. the FCA), so that I can offer some suggestions as to how the process could be made more consumer friendly.

So to clarify - I'm talking about regulators, and not reviewers. So I think the above point doesn't have relevance in the context of this thread. I also think you have the incorrect notion on the origin of the £500 fee (I think by 'fee' you're refering to the case fee, correct?). I wouldn't have to make a decision on whether to pay £500 to have a case reviewed by the FOS if I did escalate a complaint to the FOS in relation to something that is currently allowed to be escalated to them as a consumer (this thread's topic background isn't covered by this process anyhow). The financial institution itself would be forced to pay the £500 to the FOS if a consumer brought a case to them for review, regardless of the outcome (i.e. even if the case had no basis at all and the consumer had no hope of a review in favour of the consumer).

As you rightly state, in this case (or rather, in the conext of the background which sparked the question I presented on the thread) the FOS would indeed have nothing to review. But as I've noted above, this isn't what I've said. Noting that 'they don't want your business, end of' isn't quite true, although you weren't to know, all of our corporate cards in IBM are with....Amex!

leetabix

stclair wrote: »

http://www.youtube.com/watch?v=WOdjCb4LwQY

Ha, like it .

chattychappy

OP, I believe the changes you want are beyond the scope of current regulation and really this is a political issue.

Note the Financial Services and Markets Act 2000 gives the following objectives for FSA regulation:
3. Market confidence.
3A.Financial stability.
4. Public awareness.
5. The protection of consumers.
6. The reduction of financial crime.

CC activities are outside of FSA regulation, though issuers are often regulated by the FSA in respect of their other activities. As I mentioned, the OFT grants licences to lenders. The FOS handles complaints by consumers (set up for FSA regulated activies, but their scope was extended to include CCs). Other regulators have a minor impact - eg Information Commissioner for data protection issues.

The point is, that this represents the strands of regulation that are in place. FSA type objectives, FOS as a forum for settling disputes as an alternative court proceedings, the OFT who assess suitability for credit licenses and competition practices more widely.

So you have a free market, modified to the extent given above. If I understand you correctly, you want a greater encroachment into lenders commercial freedom. Unless you can engage a regulator via one of the limbs above, I think you will have to lobby for a change in legislation.

Though the regulatory regime is changing, I don't think this will make any difference.

leetabix

chattychappy wrote: »

OP, I believe the changes you want are beyond the scope of current regulation and really this is a political issue.

Note the Financial Services and Markets Act 2000 gives the following objectives for FSA regulation:
3. Market confidence.
3A.Financial stability.
4. Public awareness.
5. The protection of consumers.
6. The reduction of financial crime.

CC activities are outside of FSA regulation, though issuers are often regulated by the FSA in respect of their other activities. As I mentioned, the OFT grants licences to lenders. The FOS handles complaints by consumers (set up for FSA regulated activies, but their scope was extended to include CCs). Other regulators have a minor impact - eg Information Commissioner for data protection issues.

The point is, that this represents the strands of regulation that are in place. FSA type objectives, FOS as a forum for settling disputes as an alternative court proceedings, the OFT who assess suitability for credit licenses and competition practices more widely.

So you have a free market, modified to the extent given above. If I understand you correctly, you want a greater encroachment into lenders commercial freedom. Unless you can engage a regulator via one of the limbs above, I think you will have to lobby for a change in legislation.

Though the regulatory regime is changing, I don't think this will make any difference.

Yes, unfortunately I feared the FSA wouldn't have scope of the process I described in terms of its regulation - fortunately however, the one body I do have sight of is the aforementioned successor to the FSA which will have a different scope of remit - the FCA (Financial Conduct Authority).

I just found their approach document - If you check out the link below to the actual document, it has a very very far reaching scope (the scope section is described at a very high level, giving them a massive scope):

http://www.fsa.gov.uk/pubs/events/fca_approach.pdf

Also, selected Excerpts from section 3.3 (Objective and Powers) which seem to answer my question as to who the relevant regulator will be for my noted process:

The FCA must also have regard to six (James - only two mentioned here as relevant to the post) regulatory principles, namely:

- the general principle that consumers should take responsibility for their decisions

- openness and disclosure, publishing information about regulated persons or
requiring them to publish information, which underlines the importance of the FCA
making market information available, with appropriate safeguards, to reinforce
market discipline;

It could be argued that a consumer cannot make a fully informed decision about their decisions if a financial institution isn't willing to enable them with relevant information to do so. Also, the openness/disclosure part about market information (and as already discussed on here, with appropriate safeguards) to reinforce market discipline (i.e. power to the consumer at the detriment of the business). Perhaps I'm reading these out of context though, or with wishful thinking...but it does at least give regulatory grounds to open a dialogue with the FCA about the process of credit applications.

Thanks for the additional information, does put it all into context!

By the way, to all the people that seem to have had a negative to this thread, perhaps you should take a leaf out of the book of....Martin Lewis himself:

Excerpt from https://forums.moneysavingexpert.com/discussion/25321 , especially the comment below:

Martin_Lewis wrote:

My philosophy is we live in an adversarial consumer society. A company’s job is to make money, nowt wrong with that. Yet a consumer’s job should be to maximise their cash too, nowt wrong with that either.

I’m purely, un-apologetically a consumer lobbyist. Billions are spent on marketing and advertising to help businesses profit, while consumers are sub-served, fending for themselves.

Also, another nice post showing the ethos of what this site (and it forums by extension) should be about at http://blog.moneysavingexpert.com/2010/09/28/martin-lewis-turns-down-travel-agents-invite/ but I won't include any further quotes here as the one above sums it all up rather well.

So in summary, lobbying for change to the detriment of business' and to the benefit of consumers is what Martin himself says is why he's here, doing what he's doing - and to those people who seem irate that I've been in consultation with the FCA to faciliate a potential change in the consumer's benefit, and have asked the simple question of which bodies covered this area...then I'm not quite sure why you posted on the thread .

Thanks again to those I thanked, I now have my answer!