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Ask the expert: Credit card defaults
By Joanne Roberts
I have two questions about credit cards. First, is it legal for a card issuer to issue a default notice without first advising the cardholder of this impending action? Secondly, is it possible for companies to pass a debt (which is being repaid each month on time at an agreed figure) to a debt-management company, again without first informing the cardholder and therefore giving them the opportunity to do something about it?
JF/County Antrim
All banks and financial institutions are subject to stringent regulations in terms of the way they can market their products and deal with their customers. For banks, building societies and credit-card companies, one of the main codes of practice or conduct they adhere to is the Banking Code. This code sets out how you should be treated, what you can expect, and what to do if and when things go wrong.
In answer to your first question, the answers is yes - it is legal for a credit-card company to issue a default notice without advising you in advance. In practice though, if you had not made payments when they were due, you should have received reminders from the credit-card company. Issuing a default notice is an extension of this, if payments have persistently not been made. However, if your payments are up to date and a default notice has been issued, then something has gone wrong and you should contact your credit-card company immediately.
In terms of your second question about whether a credit card company can pass a debt being repaid each month as agreed to a debt management company, the answer is again yes. All banks, building societies and credit card companies that pass your debt to debt- management agencies undertake to do so with only reputable firms that also adhere to the Banking Code.
The Banking Code lays out rules that financial institutions should follow. You can find out more about this from the British Bankers Association website. The most pertinent section for you will be section 14 on financial difficulties. It sets out what companies will do if you get into financial difficulties and it also covers the section of outsourcing your debt to debt-management agencies. The specific web page is bba.org.uk/content/1/c4/52/27/bankingcode2005.pdf.
Finally, if you believe that your card company has not acted in accordance with the Banking Code you can make a complaint direct to the company. If you feel that they do not sufficiently address the issues you have raised, you can then take your complaint to the Financial Ombudsman Service. Its website is financial-ombudsman.org.uk and the telephone number is 0845 080 1800. Remember that you cannot go straight to the Ombudsman without first allowing your card company to investigate the issues you raise.
Joanne Roberts
A director at Needanadviser.com and an expert in holistic financial planning
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