Complain to the FOS - decisions involving minicredit - microcredit

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Noticed a few interesting ones.....

complaint

Miss H complains that – when she borrowed £80 – Microcredit Limited (trading as MiniCredit.co.uk) charged her late payment fees and sent her a threatening letter claiming £527.

She says MiniCredit took money from her, leaving her without enough for priorities.

background

MiniCredit lent Miss H about £100 in July 2012.
It wrote to her on 10 October 2012 claiming £527. She complained to us.

The adjudicator recommended that this complaint should be upheld.

He concluded that MiniCredit should:

1. remove the debit attempt fees and debt recovery fee applied to the account (£620) and

2. pay Miss H £350 for distress and inconvenience (but may retain £94 to clear the outstanding balance on the account).

MiniCredit disagrees with the adjudicator’s opinion.

It says, in summary, that Miss H had not contacted it before 25 October. my findings I have considered all the available evidence and arguments to decide what is fair and reasonable in the circumstances of this complaint. Where the evidence is incomplete, inconclusive or contradictory (as some of it is here), I reach my decision on the balance of probabilities – in other words, what I consider is most likely to have happened in light of the available evidence and the wider circumstances.

I see that – in the first ten days after her repayment fell due – MiniCredit made two dozen unsuccessful attempts to debit Miss H’s bank card with sums ranging from £15 to £281.

I consider that it ought reasonably to have realised that she was in financial difficulty.

I infer that something changed in mid-August when debit card payments started to go through.

I find it more likely than not that Miss H had contacted MiniCredit.

I am not at all satisfied that MiniCredit’s response was reasonable.

Far from suspending interest and charges as I might expect, MiniCredit continued to charge interest at 1% per day and it applied charges which multiplied the debt.

I consider it wholly unreasonable that MiniCredit has admitted that it made over a hundred unsuccessful attempts to debit money from Miss H’s card – and charged her a fee of £5 for most of them.

I consider that – when Miss H made a chargeback request to her card provider - it was highly inappropriate for MiniCredit to accuse her of fraud.

On balance, I do not find it unfair or unreasonable that MiniCredit now makes a much reduced claim of interest of £94 and charges of £80 in line with the terms of the agreement.

I note that MiniCredit has said that Miss H paid £130 which her card provider refunded and £180 which stayed with MiniCredit, leaving a balance due to it of £94.

Miss H emailed MiniCredit on 25 October saying that she would not be making any more calls to its office. She also said that she had tried to make an arrangement when she first found herself in difficulty.

She said that MiniCredit had left her and her children with no food.

She said she had called and told MiniCredit immediately when her family income stopped. MiniCredit did not contradict Miss H’s email until mid-December.

Therefore, her email reinforces my finding on balance that MiniCredit ought reasonably to have known in early August 2012 that Miss H was in financial difficulty.

Miss H says that she suffers from two disabling conditions.

And she says that she and her three children literally starved for weeks because of MiniCredit’s actions.

On balance, I accept that MiniCredit’s requests for card payments – albeit many unsuccessful and some later refunded through her card provider – caused Miss H further hardship and anxiety at an already difficult time.

Overall, I conclude that fair and reasonable compensation is £375.

my final decision

For the reasons I have explained, my final decision is that I uphold this complaint.

In full and final settlement of it, I order Microcredit Limited (trading as MiniCredit.co.uk) to:

1. pay Miss H £375 for distress and inconvenience and

2. not (by deduction from the £375 or otherwise) demand payment of more than £94 from Miss H.

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Another example......

complaint

Mr G says Microcredit Limited (trading as MiniCredit.co.uk) did not help him when he was unable to repay a payday loan.

He is unhappy with the charges and interest added to his account. our initial conclusions

Our adjudicator concluded that Microcredit had not treated Mr G positively and sympathetically.

He recommended it remove interest and charges applied to the account from the date Mr G first told Microcredit he was in financial difficulty.

He proposed it remove fees for doorstep collection and debit attempts.

Microcredit disagreed.

my final decision

To decide what is fair and reasonable in this complaint, I have considered everything that Mr G and Microcredit have provided.

I agree Microcredit should remove all fees and interest applied to the loan after Mr G had contacted them about his hardship.

Microcredit says debit attempt fees incurred before it was aware of his hardship should still apply.

However, I find in line with the OFT guidance that the initial failure to debit the full balance from Mr G should have indicated to Microcredit that Mr G was possibly in hardship.

By adding repeated failed debit charges on top of overdue penalties Microcredit was not treating Mr G positively and sympathetically.

I find that Mr G made reasonable attempts to negotiate with Microcredit.

Microcredit was under no obligation to accept Mr G’s offers of settlement. However, it was required to respond positively and sympathetically.

By adding significant interest and charges and failing to set up an affordable repayment plan Microcredit was not doing this.

Microcredit has offered a reduced settlement to Mr G but I am not persuaded this goes far enough in this instance.

I think the redress proposed by our adjudicator is a fair and reasonable resolution.

My final decision is that I uphold this complaint as set out in full overleaf.

Under the rules of the Financial Ombudsman Service, I am required to ask Mr G either to accept or reject my decision before 18 November 2013. M

The ombudsman may complete this section where appropriate – adding comments or further explanations of particular relevance to the case.

ombudsman notes

My final decision is that I uphold this complaint and direct Microcredit Limited (trading as MiniCredit.co.uk) to:

reduce Mr G’s outstanding liability by:

• removing all interest, fees and charges applied after 10 June 2012.
• removing all debit attempt fees and the debt recovery fee incurred since the account first went into arrears. send Mr G an up to date statement of account.

Microcredit should now liaise with Mr G to come to a mutually agreeable repayment plan for the account balance, taking into account Mr G’s circumstances and ability to pay.


what is a final decision?



A final decision by an ombudsman is our last word on a complaint. We send the final decision at the same time to both sides – the consumer and the financial business.



Our complaints process involves various stages. It gives both parties to the complaint the opportunity to tell us their side of the story, provide further information, and disagree with our earlier findings – before the ombudsman reviews the case and makes a final decision.



A final decision is the end of our complaints process. This means the ombudsman will not be able to deal with any further correspondence about the merits of the complaint.
what happens next?



A final decision only becomes legally binding on the financial business if the consumer accepts it. To do this, the consumer should sign and date the acceptance card we send with the final decision – and return it to us before the date set out in the decision.



If the consumer accepts a final decision before the date set out in the decision we will tell the financial business – it will then have to comply promptly with any instructions set out by the ombudsman in the decision.



If the consumer does not accept a final decision before the date set out in the decision, neither side will be legally bound by it.

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And one more.......

complaint

Mrs A complains that Microcredit Limited, trading as MiniCredit.co.uk, did not deal with her fairly when she was unable to repay a payday loan.

background

Mrs A took a payday loan in July 2012 of £450 and rolled this over in October 2012 with £589.50 to be paid.

She contacted Microcredit to say she was experiencing financial difficulties.

She asked that her interest payments be suspended for 28 days so that she could set up a debt management plan.

Microcredit responded to say that it did not deal with debt management companies as it needed payments to be made by debit card.

Mrs A has been making monthly repayments of £36.69 through a debt management company since December 2012 which she says have not been acknowledged by Microcredit.

The adjudicator recommended that Microcredit be required to reduce the debt outstanding to £589.50.

He said that it had a duty to deal with Mrs A’s financial difficulties positively and sympathetically.

He said that, by continuing to apply interest and charges to her account (which had resulted in a balance of over £1,200) and by refusing to deal with her debt management company, it had not acted fairly.

He did not think that Microcredit in stating that Mrs A should “…face the consequences of her own actions…” was either positive or sympathetic.

He noted that it was not obliged to suspend interest or charges, but concluded that the outcome of these additions to the debt for Mrs A was not fair.

Microcredit did not agree.

It made a counter offer that Mrs A be required to pay a total of £939.50 which was based on the original loan amount, interest of £409.50 (60 days at 1% per day) and overdue penalties of £80.

It said that it had calculated this according to the Good Practice Customer Charter.

It considered that by originally offering Mrs A a payment plan it had shown a positive approach.

my findings

I have considered all the available evidence and arguments to decide what is fair and reasonable in the circumstances of this complaint.

I can see that Microcredit has referred to an industry charter on “Payday and Short terms loans”, which was required to be introduced across the industry by 26 November 2012.

I appreciate that this post dates some of the contact Microcredit had with Mrs A but as it has mentioned this I consider it worth quoting relevant extracts in full.

This says “If you are having problems repaying your loan, we will:

- Deal with cases of financial difficulty sympathetically and positively and do what we can to help you manage what you owe.
- Freeze interest and charges if you make repayments under a reasonable repayment plan or after a maximum of 60 days of non-payment.
- Tell you about free and independent debt counselling organisations who can also help you.”

Microcredit takes the view that Mrs A’s financial difficulties were not unforeseen.

It also says that due to her “over commitment”, Ms A “should not be treated in the same way as a customer who for example faces a sudden health issue that causes a decrease in income”.

Whilst I understand the distinction it is making, in advancing a short term payday loan I cannot see that there is not also a responsibility for Microcredit to take reasonable steps to ensure it is affordable, and if it proves not to be, then to treat Mrs A fairly.

In this case Mrs A took proactive steps to contact Microcredit and seek professional debt advice when she realised she could not make repayments.

I find Microcredit’s response to her that it “…does not deal with debt management agencies directly” an unreasonable attempt to discourage her from seeking this support.

Instead it wanted her to make payments within 120 days and during a period when interest would continue to accrue.

It said she could avoid only a default if she did this.

Mrs A asked for some time to set up a payment arrangement and that Microcredit deal with her agency.

Instead it continued to pursue her and now says that in any case it did not receive correspondence from the agency.

I am not clear what was sent, but I do not consider that this would have made a difference given the comments it had made.

Whilst I accept that it had applied interest charges in line with the terms of the agreement and has now offered a reduction in the debt, I do not consider that the outcome for Mrs A is fair.

In reaching this view, I put particular weight on Microcredit’s refusal to deal with the debt management agency she nominated.

As a result, I agree with the conclusions of the adjudicator, except that I require Microcredit to arrange the payment plan through her debt management agency rather than directly with her.

my final decision

In light of the above, my decision is that I uphold this complaint and in full and final settlement I order Microcredit Limited to:

1) Reduce the total amount originally owed to £589.50 and now less any payments already made.

2) Agree a suitable repayment plan with Mrs A’s representative for the remaining amount.

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Bye bye to minicredit at last.

http://www.fca.org.uk/your-fca/documents/requirement-notices/microcredit-vreq