Debts and Financial Ombudsman

Floppy_Sock

Hi all - thought I'd share my experience of my debt journey and some positive things that have happened recently. Some details aren't exactly precise simply to keep my anonymity. 

I wont go into the detail of how I got into debt but in 2019 I defaulted on 5 accounts (4 credit cards and a student overdraft) - to the tune of around £26k. I was in a low paid job and applied for 2 credit cards initially which had limits of £3k each. I maxed these out almost immediately due to stupid spending however both banks (Barclaycard & MBNA) kept offering to up the credit limits to eventually £9k each! (still on less than £20k salary). These were at near 100% utilisation but a lot was on 0% interest free promotions as I'd flip the balances between the 2. I then applied for more credit cards with 0% offers and kept spending stupidly.

Eventually it all came crashing down when I missed a payment and the 0% promo ended, having a knock on effect on each 0% promotion as I missed more payments and minimum payments quadrupled within a month. I defaulted on all of these and they now sit with DCAs and I'm paying these off with relatively small but affordable monthly payments - and currently sit at around £16k.

Since then I've spent a lot of time reading up on financial matters, I've become more financially savvy and understand what financial responsibility is. I've also made a detailed record of my financial history (think monthly statement amounts, interest charged, payments made, credit limits given) since around 2015 which I maintain in a spreadsheet each month. 

After reviewing my history I decided to raising complaints to the 2 banks that initially offered me credit cards on the basis of a lack of proper affordability checks - and for the continued credit limit increases despite my spending habits, salary and near max utilisation. I asked them to refund me all interest on the accounts (which I'd then offset against the balances outstanding with DCAs) and to remove any adverse records from my credit file relating to these accounts. Naturally they both rejected my complaint. 

I escalated both of these to the Financial Ombudsman and provided the adjudicator with my extensive financial records, reasoning for the complaints and data relating to my income and outgoings during the periods the accounts were open. 

- Barclaycard decided to uphold my complaint without the FCA having to investigate further - They're contacting the DCA who currently hold the debt to refund all the interest charged on my account for the duration it was open, and arranging for any adverse information in my credit report to be removed. 

- MBNA let the adjudicator make his assessment and again, they decided that I should be refunded all interest from the first credit increase (to be offset against the balance held by the DCA) along with removing any adverse information on my credit report. 

The adjudicator decided that both banks had failed in conducting proper affordability checks and failed to use the information they had available to them (credit report and my spending habits) to show them that credit limit increases shouldn't have happened. They also took the view that the banks suggesting minimum payments were affordable wasn't acceptable as they were on 0% promotional rates, and that they should have considered my credit balances as if they were being charged interest - doing so it would have been clear these weren't affordable as minimum payments across all my balances would have been £1100+ (on a monthly salary of £1500). 

I didn't do this to absolve myself of any blame - I spent recklessly and paid the price with no access to credit since, and delaying when I'll be able to purchase my own home due to my atrocious credit history. However, I did feel that I was exposed to massive amounts of credit that I failed to manage well, but also that I shouldn't have been given in the first place. Note that I'm continuing to pay off what I spent on these credit cards, it's just that the interest for this spending is being wiped. 

I'm waiting to see what happens next as the balances with the DCAs haven't been reduced yet, and the defaults remain on my file. For now I've contacted the DCAs and they've put the accounts on hold, meaning I can pay more to the other creditors that didn't warrant complaints. I'm supposed to hear back from them by the end of this week with next steps but if I don't, I've been told to let the FOS know. 

Apologies for the long post but it may give others something to think about when addressing their debts - do you think you were lent to affordably? If not it might be worth a complaint and escalation which could see a reduction into what you owe.