Credit card default

drifter17a

a friend asked me re his options on default by lender.

he opened an account, declared income and lender gave him a credit card. two month later they asked for his payslips, he explained he has a company so pay's himself small salary and takes bonus quarterly which adds up to the income however lender wrote back stating account is in default and pay fees by 14 days.

he paid it straight away and wasn't fussed.

he asked whether they can register a default on his credit history and from my research they can't as he paid full amount within 14 days. any thoughts?

CliveOfIndia

His income is a totally different issue to a default.  His declared income would have determined whether or not he was approved for a card in the first place.

Irrespective of income, he must pay at least the minimum amount every month by the payment-due date, otherwise he is in breach of his contractual obligations.

If he failed to do this, then the lender can legitimately register a late payment marker (note that a late payment is technically different to a default).

If he paid as soon as he was notified (and this was an isolated occurrence), then he shouldn't get a default, but could get a late payment marker, depending on the lenders internal processing schedule.

drifter17a

he paid all statement on generated date/straight away in full, issue think was lender didn't like to see something and terminated his account/sent a default letter.

his last statement was generated on 1st March and he paid it on second in full. letter from them gave him until 14th march to pay and they will register a default but by looking online, they can't as he has no arrears and lender has simply decided to terminate the account/no late payment or ...

CliveOfIndia

drifter17a said:

he paid all statement on generated date/straight away in full, issue think was lender didn't like to see something and terminated his account/sent a default letter.

his last statement was generated on 1st March and he paid it on second in full. letter from them gave him until 14th march to pay and they will register a default but by looking online, they can't as he has no arrears and lender has simply decided to terminate the account/no late payment or ...

I'm sorry, this doesn't make sense to me.  Are you saying that he received a statement and paid it in full before the "payment due" date?  If so, there's no reason the lender would have subsequently sent a letter asking him to pay in full.

The only thing I can think of is that he didn't actually pay.  By which I mean, he paid online but entered the incorrect recipient details - so he thought he'd paid, but actually the payment didn't go to the correct account (with the correct payment reference number).  Or did he have a Direct Debit set up for the full amount?  In that case the error is on the part of the credit card company.

drifter17a

letter from them was generated on late feb before statement date when they decided they want to close him account and demanded full balance back. then statement generated on 1st and he paid in full. letter wasn't received until 6th march ... ho[pe that is clear

nothing to do with him no paying or minimum payment etc, just bank decided to close based on income they saw( didn't give a reason) and demanded full balance back

CliveOfIndia

Thanks for the update.  So it sounds like they have decided, for whatever reason, that they no longer want him as a customer.  That's fair enough - I don't mean that nastily, but any lender is free to decline or withdraw credit from anyone as long as it's not classed as discriminatory

But I'm still puzzled as to why they're talking about a default - if he's always paid in full on time, there is no question of a default.

Would this be an accurate assessment:

Late Feb they decide to close the account and send a letter asking him to pay in full by 14th March, and they would issue a default notice if he didn't.

Letter was delayed in the post.

Statement arrives on 1st March.

Statement paid in full on 2nd March.

Letter about account closure arrives on 6th March.

If this is the case then it kind of makes sense.  Best thing your friend can do is give them a call (or check online if he has that facility), make sure there are no further transactions that have been processed since the last statement.  If there are, then pay them off.

As to why they chose to close the account you will probably never know.  But as long as he's repaid any remaining balance then he'll be fine.

As I say, card companies close accounts all the time for a variety of reasons.  It's nothing personal, purely a business decision.

drifter17a

makes sense, what is puzzling is letter in late feb states you account is in default and demand full balance even before statement was generated. i guess somewhere in their term it states if they decide to close your account, you need to pay them back in full within 14 days or they can take legal action etc / no longer min payment. he had cleared jan statement in full so in feb no statement before they decided to issue default


I guess by default they have meant terminated and if you don't pay by x date then they will put a mark on your credit file

Marchitiello

There have been few reports on here of similar letter being issued about account  closure (could we know who the lender was so that we can understand a pattern by any chance?).

I believe that what this type of lender is doing (I start to believe it may actually be a particular one), is closing the account and at the same time sending a default notice . This may actually be a carefully written letter that sounds like you are in default but actually means that if you do not pay within the terms, you are in default. Also, from discussion around the COVID time, I think Overdraft can be removed and balance be demanded in full immediately by the lender but Credit Card balances cannot (at least for the normal ones). I think generally (there may be exceptions for specific T&C and or Chargecards) the lender can technically close the account but you can still make the minimum payment as per T&C for as long as it takes to pay off the balance (probably incurring in interest in the process), and the lender cannot report the account as defaulted. 

drifter17a

Lender was amex

Marchitiello

drifter17a said:

Lender was amex

I suspected that much (all the reports I have read so far where about Amex). I am not entirely sure, but the T&C may include something around having lied/ provided inaccurate information on the application resulting in an immediate closure of the account and demand for full balance payment. Or was the product a Charge Card (charge cards do not offer credit and the full balance is always do immediately (technically days after statement is produced))? 

Other then the above scenarios, they would not be able to demand full balance payment on closure of the account under the threat of  a Default notice, and it will be more likely a carefully written letter alluding to that possibility.

drifter17a

Well as far as I know he stated his income and they wanted payslip. He explained how that income is arrived at and showed payslip and p60 confirming bonus paid making up to that salary but that wasn’t good enough i guess

Can they register default on account? I don’t think so as long as you have paid it back in full