Credit Card Application Ombudsman

thegoodman

Where are you, leetabix? In your past post you have said you are goingnto update and the next steps to take. No response from you show that you are trying to get back at Amex without any plan to change the law. All other stuff said by you is wast of time and don't mean anything.
If you like post by leetabix further reading can be found at

https://forums.moneysavingexpert.com/discussion/3042742

Waiting for your response.

thegoodman

Hi, Do you have further response from any one in reference to OP?

leetabix

Hi all, apologies for the delay in getting back to you all - I said I'd do this on Friday and then the weekend happened! Back now however, will tackle each post/comment in turn where required.

- Firstly, thanks for the support thegoodman - you've got exactly the right kind of idea, and the spirit of my initial post. I think that there's a number of solutions, ranging from the most to least level of effort/granularity in terms of admin/regulation. At the heavy-handed end comes the suggestion of an ombudsman reviewing a case when escalated to it by a consumer applying for credit and then being rejected + rejected again after appealing. At the lighter end (admin and cost-wise) is the submission of detailed credit lending criteria to the Ombudsman, with an approval/rejection by them based on whether the criteria is seen to be financially responsible (both for the bank and the consumer), with a detailed policy available for public use on what constitutes as fair/unfair. There's pros/cons for each, and most people will just ask who's going to pay for the process/admin to be setup - the answer in all cases is a mix of the taxpayer and the financial institutions, as with all regulation (I think that's how all regulation is funded anyway, point me out if wrong).

Although, just noted your other remarks about my posts - I don't have the hump about Amex rejecting me - I just realised when I went through the application process that it isn't anywhere near as regulated as other processes in finance - as someone else rightly said earlier in this post, it's probably due to the fact that you're not at a financial disadvantage if they reject you, but conversely the company could be putting itself at a small cumulative risk for each consumer accepted that they should've instead rejected. However, I reckon if the regulator did indeed bring measures like the ones discussed in this post into force, then they would demonstrate confidence to the consumer that the financial institutions are acting responsibly - so many people seem to want to blame banks for putting us into a financial crises, however things like this should restore a tiny bit of that confidence. But no, I'm not personally irate by Amex - my company of ~500,000 employees use them for our corporate card, and our executives have had a long-standing relationship with Amex. Our last CEO was a previous executive, and I had a lot of respect for the guy and what he did to the company - Amex are a business and they do very well at it, by making lots of money and keeping the shareholders investing in the company. I don't harbour any discontent at them (or any other) financial institution - they're trying to make money, I'm just thinking about this from what would make the consumer experience better, and leave them assured that the process is indeed a financially responsible one.

izools - compeltely agree, couldn't have articulated that point any better myself! If banks do have a limit per month, may as well close the application on their site until the next month/trigger point - as it also results in more admin/cost for the company in processing those applications too! I'm not actually convinced this practise actually happens though, due to the wasted costs that a half-astute executive would note and clamp down on. But if it does...yes, completely agree. And the regulation suggested here would cut it out if by chance it did happen, saving money/time for all parties concerned.

chattychappy - the aim of this isn't so poor people can get credit (which I think you imply is associated with a higher likelyhood of bad debt being accrued). I'm actualy for companies like Amex putting an amount on their products for minimum income, saying 'minimum £30k income' etc., the point being that you know where you stand as a consumer. If I don't earn that much, it's unfortunate that I might miss out on a product that would potentially give me some benefits I'd find useful, however at least I know where I stand as a consumer - the same way that many other products have eligibility criteria, it gives me more information as a consumer and empowers me to choose the product that's most suitable to me. So yes, not trying to embark on a campaign for poorer people to get credit where they wouldn't otherwise, actually some companies would want people with the ability to rack up a small amount of debt (but not too much) as they make money off them by those customers incurring charges/fees/interest on the account, and would prefer to shun people who are acting in a financially responsible manner who're far less likely to incur charges (i.e. customers with a high income + who always pay their bills before any interest is accrued, and never use their overdraft).

I think that's all points answered for now. As to updates on the situation, I've asked my contact in the CAB to open dialogue with Neil/the FCA, as it's better that a consumer body like CAB deal with this from the consumer side, than just someone like me, who is inevitably biased and would be unfair to represent an entire swathe of consumers with different opinions/preferences as to their consumer experiences.

chattychappy

leetabix wrote: »

At the heavy-handed end comes the suggestion of an ombudsman reviewing a case when escalated to it by a consumer applying for credit and then being rejected + rejected again after appealing.

Oh no, that would be hopelessly expensive. Unless the consumer was willing to pay for something up front....

leetabix wrote: »

At the lighter end (admin and cost-wise) is the submission of detailed credit lending criteria to the Ombudsman, with an approval/rejection by them based on whether the criteria is seen to be financially responsible (both for the bank and the consumer), with a detailed policy available for public use on what constitutes as fair/unfair.

No, can't agree with this either. The thought of lenders having to have their lending policies "supervised" by the Ombudsman horrifies me.

You present these as two alternatives for intervention. But I'm struggling to see the need for this kind of intervention at all.

There may be some issues around fairness - eg advertising APRs that few people will get, rate jacking etc. I'm happy for these to be dealt with (as these examples have been) as the need arises.

I'm not sure why the FCA are getting involved. If CC licensing is taken away from the OFT, it is more likely to be the new CPMA that will get the function.

thegoodman

I am sorry but I can't see it working. No bank is going to give the control of credit to any 3rd party unless some kind of fund is created as an insurance. Still you are working on the policy where if you meet the criteria you get the credit. It can't work without help of tax fund.
How is credit limits going to work?
Otherwise rather than reject the customer, card company will give out £50 limit

leetabix

chattychappy wrote: »

Oh no, that would be hopelessly expensive. Unless the consumer was willing to pay for something up front....



No, can't agree with this either. The thought of lenders having to have their lending policies "supervised" by the Ombudsman horrifies me.

You present these as two alternatives for intervention. But I'm struggling to see the need for this kind of intervention at all.

There may be some issues around fairness - eg advertising APRs that few people will get, rate jacking etc. I'm happy for these to be dealt with (as these examples have been) as the need arises.

I'm not sure why the FCA are getting involved. If CC licensing is taken away from the OFT, it is more likely to be the new CPMA that will get the function.

Why would lending policies being supervised by the Ombudsman horrify you? I'm curious to know as I can't see how this would be a negative thing is the correct regulation is applied.

Regulation isn't needed everywhere, so I take the point that some might be happy with the situation as is. However, I see the need for intervention from a consumer point of view. This is because a lender could have a policy that accepts only those who have a tendancy to accrue a small amount of debt (not too much, else it's not worthwhile for them as a risk), thereby making them max profits when it comes to fees for overdraft usage/charges/interest on credit no repaid within 30 days of the end of month statement being generated etc.

Other examples could be used where a lender may be introducing weighting factors into the credit lending assessment that are geared towards the potential profit they can make from a customer, which could also be considered as financially irresponsible lending.

So in summary - I think we need regulation to prevent companies from potentially acting in a financially irresponsible manner, and to prevent financially responsible customers being prevented from obtaining credit.

leetabix

thegoodman wrote: »

I am sorry but I can't see it working. No bank is going to give the control of credit to any 3rd party unless some kind of fund is created as an insurance. Still you are working on the policy where if you meet the criteria you get the credit. It can't work without help of tax fund.
How is credit limits going to work?
Otherwise rather than reject the customer, card company will give out £50 limit

The 'lighter admin' suggestion didn't suggest that the control of credit could be given to a 3rd party (i.e. an ombudsman) - instead the suggestion was for the ombudsman to review the criteria used in ascertaining eligibility. You could argue that the Ombudsman has a control on the credit in a partial sense, but again it depends on what criteria the Ombudsman use in terms of what's deemed as financially responsible/irresponsible, and if implemented logically, I'm not sure how this could be a detriment to consumers.

An initial one-off review of each financial product, followed by a thumbs up by the ombudsman, would give confidence to consumers that the banks aren't shaping their criteria to maximise profits at the expense of financially responsible behaviour. At the same time, the criteria (as it is now) could still be witheld from the consumer/applicant, erasing concerns of situations that would encourage an increase in fraudulent by credit applicants. Also, the same as now, if you met the displayed criteria on an application form (i.e. minimum of £xx income etc., home owner, residence of x years+ at current address) you still wouldn't be guaranteed to get the credit/financial product, due to the credit determination being conducted the same way it is now i.e. with weighting factors witheld from the consumer.

This suggestion, if ever implemented, would only control the criteria for credit being lent, and wouldn't control the amount of credit being lent.

As far as I'm aware, all regulation in the UK is funded by a mix of tax payer money (ombudsman/regulator running costs) and private company funding (forced, through regulation - i.e. charges to companies for each case brought to the ombudsman by a consumer, whether the ombudsman upholds/rejects the case regardless) - any new regulation would work in the same way, and therefore any argument over funding of regulations should really be a seperate topic on here (i.e. whether we/companies pay too much for regulation as tax payers etc.)

leetabix

sharpy2010 wrote: »

Bet you're a right laugh to work with...

I don't see how this post is at all related to this topic - I've forwarded the comments to an admin via the reporting system and asked for the above post to be removed.

chattychappy

leetabix wrote: »

Why would lending policies being supervised by the Ombudsman horrify you?

I want to be free to engage with a lender on terms that they wish to offer that I am happy to accept. I don't want a regulator intervening at the level you suggest.

leetabix wrote: »

However, I see the need for intervention from a consumer point of view.

I see the need to prevent the kind of intervention you suggest - from a consumer point of view.

leetabix wrote: »

..., thereby making them max profits when it comes to fees for overdraft usage/charges/interest on credit no repaid within 30 days of the end of month statement being generated etc. ...

... geared towards the potential profit they can make from a customer

I'm happy that they maximise their profits. I'm happy for regulation in terms of APRs, summary boxes, rate jacking and an FOS to investigate complaints. But you are not talking about regulation, you are talking about supervision to the point of micromanagement of lending policy.

Instituational stability and consumer interests are not inextricably correlated when it comes to lending. (Hence unlike investments CCs are not FSA regulated and are very unlikely to be FCA regulated.) In fact, if they are maximising their profits, they are less likely to go bust. So better that consumer regulation and prudential regulation are kept separate.

leetabix wrote: »

So in summary - I think we need regulation to prevent companies from potentially acting in a financially irresponsible manner, and to prevent financially responsible customers being prevented from obtaining credit.

In summary, I don't think we do. And I don't think it will happen anyway - choice would be reduced, costs would increase, there would be more barriers to new entrants and more consumers will go to illegal outfits.

thegoodman

leetabix wrote: »

This suggestion, if ever implemented, would only control the criteria for credit being lent, and wouldn't control the amount of credit being lent.

If this is the case what stop the card company to give you £50 or even £5 limit rather than decline the card. This can be used a way around the law if it ever was to change. The person can not go for review because the credit is offered.

Even better for example barclaycard may turn around and say everyone over 18 in the uk can have a card with a £1 limit. After this you would need to apply for increase with us direct. We would be back to where we started from.