Farid said the bank had not made sufficient contact with him about alternative arrangements before seeking to recover the debt, and its actions were unfair and unreasonable. He also said his difficulties with his credit card facility were not grounds for the bank to close his everyday account. He asked us to investigate.

Our investigation

We consider complaints about debt recovery action in accordance with the Credit Contracts & Consumer Finance Act 2003. The Responsible Lending Code issued under the Act provides that a lender is entitled to exercise its rights to ensure that the borrower repays the loan and that the lender must do this reasonably and in an ethical manner.

Our investigation found the bank’s debt recovery action was reasonable.  The bank deferred recovery action for four months to allow Farid the opportunity to explore his options and present a repayment plan.  There was regular contact between the bank and Farid over this period.  Unfortunately, Farid was not able to obtain further employment and thus not able to come up with a satisfactory repayment plan.  In the circumstances, we did not consider the bank had acted incorrectly in referring the credit card debt to a collection agency. 

However, we were concerned at the bank’s closure of Farid’s everyday account. While the bank met the procedural requirements for an account closure, we noted that closing transactional accounts in circumstances where a customer has experienced financial difficulty may cause customers to experience further hardship. 

Outcome

While we did not uphold Farid’s complaint, we have raised the issue of closing transactional accounts in these circumstances with the banking industry, as part of a general initiative to improve financial inclusion.