Dispute with high street bank / default now my mortgage is 10.3%

Izzey1980

Hello All,

Please can you help me.

I opened a current account with Barclays Bank in 1994, later becoming a student account with an interest-free overdraft. The issue arose when I moved house in 2012, notifying them of a change of address.

I knew there was a small amount of money on the interest-free overdraft, and in 2014, I made two payments to clear this balance. The total exceeded the amount owed.

However, I was unaware that Barclays had introduced a fee for the overdraft facility in 2014. From my recent conversations with Barclays, I understand that the outstanding balance through charges was approximately £38.00 in 2014.

They then added charges and interest to this until it reached £1,578.00 in 2020. They then closed the account and marked a default payment on my trans union credit file.

I have always kept a close eye on my  Experian and Equifax subscriptions. I have always maintained an outstanding credit file, so it was quite a shock when in January 2023, I found out my credit rating was affected after applying for a mortgage when it was declined.

What makes this unacceptable is that I opened a personal and business account with Barclays in 2018. At this point, while they were doing their due diligence, they should have raised that someone with the same name, details and address owed money.

This has left me in a desperate financial situation as I cannot obtain finance on my property and now have to pay over 10.3% interest. 

Barclay's complaints team acknowledged a banking error, removed all charges, and said the default would also be removed. This has yet to happen.

My concern is that the banks and the credit agencies should be responsible for ensuring that when a default is raised (which last six years) against a customer, it is scrutinised to understand how the debt has been derived and whether this is typical behaviour of the customer before a mark is made on a customer's profile.

In my situation, it is clear that I have never missed any payment in my entire credit history, so why would I have done this now? It was clear I was unaware of it.

In a time when people are on the cusp of a living crisis and struggling to survive, how is this justified? They need to be exposed and a change made.

M

MEM62

mstevensdevelopments said:

From my recent conversations with Barclays, I understand that the outstanding balance through charges was approximately £38.00 in 2014.

They then added charges and interest to this until it reached £1,578.00 in 2020. They then closed the account and marked a default payment on my trans union credit file.

mstevensdevelopments said:

In my situation, it is clear that I have never missed any payment in my entire credit history, so why would I have done this now? It was clear I was unaware of it.

As you have stated in your post, you did not clear the balance and the account was defaulted.  The facts, as they have been reported on your file, are correct.  I accept that you may not have known about it but, ultimately, it is our responsibility to be aware of, and settle, our debts. 

I would argue that Barclays should not have left it for six years before defaulting the account and it would be worth raising this point with them as, had it been defaulted in 2014, it would have been removed from your file by now.    

Izzey1980

Thank you for your advice.

However, there needs to be closer scrutiny on when a bank marks a default payment to the credit agency, a simple review of the customer's credit file to discover if this is typical behaviour. If not, has every effort been made to reach the customer? It is too easy to create some irreversible causing significant financial harm and emotional distress to consumers.

MorningcoffeeIV

Credit files just deal in facts, rather than the reasons, as it makes little difference to lenders whether defaults are cause by intent, lack of funds or not paying attention to their finances.  Either way, the risk is there.

Additionally, customers are unlikely to want to fund manual reviews of every default.

Izzey1980

Thank you for your comment.

Speaking about my situation

·       Barclays did not try to locate me; I had notified them of a change of address.

·       It was clear that the account was inactive.

·       The charges were £38.00. However, how is it justifiable for them to wait six years until then to place a default on my account?

·       All charges were instantly removed as they acknowledged a banking error. But the mark on my credit file is the issue. How can there be conflicting views within an organisation?

·       A default is not what someone would ever want, and I can't see how there would be a high cost for a bank to check individuals when raising a default. It can be automated, and it is not different from an online credit card or loan application.

·       I have paid for subscriptions with Equifax and Experian, which have never been shown, so I consider myself a very cautious individual and have always monitored my credit file.

 If this has happened to me, it can happen to anyone,  so this is why we should ask for a change now.

[Deleted User]

You should not be paying for Equifax or Experian, your credit files are available for free here.

Probably worth accepting the charges accrued now and filing a complaint with Financial Ombudsman, with a view to having this investigated further - any compensation can then be applied.

The finance you require to be raised on your property will be assessed by your Financial Adviser/Broker and you can raise the situation at that point - he/she will then be better informed to place you with a suitable lender.

MEM62

mstevensdevelopments said:

Thank you for your advice.

However, there needs to be closer scrutiny on when a bank marks a default payment to the credit agency, a simple review of the customer's credit file to discover if this is typical behaviour. If not, has every effort been made to reach the customer? It is too easy to create some irreversible causing significant financial harm and emotional distress to consumers.

Whether it is typical behavior or not is not relevant.  Facts are reported as they stand.  Banks will not have the resources to chase and try to speak to each customer before defaulting their account.  And the situation is not irreversible.  If the bank has made an error they can remove default.  As I previously suggested, you may have cause for complaint that the default was registered so late and I think that it is worth you pursuing that.         

Izzey1980

Thank you for your advice. I will add this to my complaint to Barclays and the FO.

However, I firmly believe that banks should do checks on customers before adding a default. Whilst I have now been a customer affected by this, I would happily pay for this service. Although there shouldn't be a cost, it is essentially the same automated software that the institutions use for credit applications, which you are not charged for when you make an application.

mcpitman

mstevensdevelopments said:

Thank you for your advice. I will add this to my complaint to Barclays and the FO.

However, I firmly believe that banks should do checks on customers before adding a default. Whilst I have now been a customer affected by this, I would happily pay for this service. Although there shouldn't be a cost, it is essentially the same automated software that the institutions use for credit applications, which you are not charged for when you make an application.

Understand your point of view.

However, the cost to review each default before application would far outway the £200 goodwill payment they will make if and when they make a mistake.

Izzey1980

mcpitman said:

mstevensdevelopments said:

Thank you for your advice. I will add this to my complaint to Barclays and the FO.

However, I firmly believe that banks should do checks on customers before adding a default. Whilst I have now been a customer affected by this, I would happily pay for this service. Although there shouldn't be a cost, it is essentially the same automated software that the institutions use for credit applications, which you are not charged for when you make an application.

Understand your point of view.

However, the cost to review each default before application would far outway the £200 goodwill payment they will make if and when they make a mistake.

I appreciate your comment, but the £200 is an insignificant amount given the emotional distress and the finical costs caused. 

This is not enough compensation for an error and should be far more. It is clear that these errors are occurring, and unless there is greater accountability and payment, it is far too easy for this to happen. It is too one-sided, and there needs to be a change.

mab3000

mstevensdevelopments said:

·       The charges were £38.00. However, how is it justifiable for them to wait six years until then to place a default on my account?

What was the overdraft limit on the account? 

I suspect it may have been £1500. And all the while the mounting charges were within that limit, you weren’t defaulting as you were in the agreed limit. It’s then sounds like it went past the £1500 after a number of years, so went into un arranged overdraft, then after no payments going in to take the account out of un arranged overdraft, the account then went into default status.