The Financial Ombudsman Service (FOS) has sided with customers who say a credit card company ‘raised credit limits’ for people who would struggle to pay it back.
Aqua has lost several lawsuits with clients who say they wrongfully lent money to people, including a mother with 13 payday loans, people on benefits and compulsive gamblers.
Over the past three months, FOS has sided with the consumer in nine decisions against New Day, Aqua’s parent company, mirror reports.
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Customers are anonymous to protect their identity.
One such customer, Mrs S, took out a New Day card in June 2019 with a credit limit of £450.
The customer said she used the money to gamble and got close to her credit limit.
Despite this, New Day increased it to £1,200 in September 2019, and Ms S complained to the FOS that the company should have prevented this.
New Day told FOS he had no way of knowing the problem with the game, but admitted he was wrong to raise the credit limit.
A customer, Miss R, took out a New Day credit card in April 2014 with a credit limit of £250.
Between July 2014 and July 2017, New Day raised the credit limit three times, to over £1,350.
Miss R, a benefit claimant, said she could not afford the credit increases and had to enter a debt repayment plan to pay off the interest.
She complained to New Day, then to FOS.
The FOS said: “As Miss R had to pay a significant amount of interest and fees due to the unfair increase in her credit limit from July 2014, I believe she lost out because of this that New Day did wrong. So New Day should make it right.”
The ombudsman recently ordered New Day to remove any interest charged outside the original £250 limit and to pay £150 in compensation, if Miss R agreed.
He also said the company should buy back the debt from the debt collection firm it sold it to.
Another Aqua customer, Miss F, 19, also received a New Day card with a limit of £250 in November 2014. It rose steadily and stood at £4,700 in August 2016.
She said the company should not have increased its limits and that she had to take out 13 payday loans because of the debt she took on.
At first, Miss F had no payday loans on file.
But when the credit limit jumped to £4,700, the FOS said his overall debts had reached over £13,000 and “there were payday loans in evidence”.
The FOS added: “There were 13 payday loans, three of which had been taken out in the last three months. At the time it looked like Miss F was in trouble and so – at that time Aqua should have asked The Miss F Situation more questions – before offering the limit increase to £4,700.
“The Ombudsman has asked Aqua to refund interest and all fees charged from that time until the date the account was refunded.”
A spokesperson for New Day said: “We strive to help customers manage their credit products responsibly. We aim to provide each customer with a credit limit based on their individual circumstances, subject to procedures affordability, regulatory and credit risk assessments.
“Upon application, all customers are asked to select how they would like to be contacted for future credit limit increase offers.
“Customers can choose to have them automatically applied, in which case they will be notified of the proposed increase and then given the opportunity to review and decline the offer within at least 30 days, after which the increase will be applied.
“A customer can change these preferences with New Day at any time once their account is opened and also choose not to be offered a credit limit increase at any time. Additionally, we are always happy to reduce limits if the customer wishes.”
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