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A friend of mine was £70 spend away from being awarded the 70k membership points bonus on his Plat. He got a credit review where he had to send in his documents, but received a letter titled “Notice of default served under section 87(1) of the Consumer Credit Act 1974”.
However, the letter was dated before his documents were even uploaded. Notice in the letter below that his balance is £0, who’s defaulting? Worth mentioning he’s on a decent and constant salary, easily provable.
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We refer to the American Express® Credit Cardmember Agreement between you and American Express Services Europe Limited (the “Agreement”). We have reasonable grounds to believe that you are unable or unwilling to pay your debts when due. This is a breach of the Agreement, as explained in the ‘Ending your agreement’ section of your Agreement. There is nothing you can do to remedy this breach.
Please be advised that, we can terminate your Agreement at any time on or after 06/05/2023, and:
1. We will serve notice on you, in writing, demanding payment of the outstanding balance, plus interest. If payment is not received, we may take legal proceedings against you for the outstanding balance, plus interest. This may be different from the outstanding balance as of the date of this notice, shown below. Please note any Unbilled Pending transactions may not be included in the outstanding balance below and will also need to be paid.
The outstanding balance (excluding any Unbilled/Pending transactions) as of the date of this notice is: £0.00.
Your account may be referred to a debt collection agency and you may be charged for any reasonable costs which we ineur in collecting amounts you owe, in accordance with the terms of the Agreement.
3. No further use can be made of the Credit Card account.
4.
Information regarding the status of the account will be reported to a credit reference agency where it will remain
on record for 6 years.——-
Any advice for him?
Yes. The initial advice would be for him to obtain a copy of his Equifax/Experian credit report to see what’s going on and not necessarily an issue with Amex, but they’ve clearly seen some bad debt when reviewing his credit file.
Tell him to look at the long Amex cancelled/suspended thread on here, this seems to be becoming quite common!
The term ‘default’ has many meanings according to context and doesn’t just mean that payment is late. Here Amex is claiming that your friend is in default as they have information that demonstrates they are ‘unable or unwilling’ to pay their debts.
That information probably comes from a credit bureau such as Equifax. It could be that your friend has fallen behind with payments on some other credit; equally likely, there could be signals in the data that suggest affordability might be difficult, maybe because mortgage payments have increased or because additional financial commitments have been entered into (new car, perhaps?)
To a degree, I sympathise with Amex. To comply with regulation, it has to to withdraw credit lines from borrowers who may not be able to afford to repay; if you don’t like that policy, complain to the FCA, not to Amex.
But the quoted letter is horrible, giving no context or explanation to the decision and absurdly saying that it may use debt collection agencies to ensure the balance of £0 is repaid. And the sentence saying, “There is nothing you can do to remedy this breach,” is equally outrageous. The credit bureaux are known for holding exceptionally unreliable data (the FCA recently issued a damning report on the subject if you’re interested), so there is a good chance that your friend’s ‘default’ is based on false data. Even if the data were accurate, the bureaux do not have a sufficiently rounded perspective on individuals’ finances to be able to assess affordability in that way. Maybe your friend has substantial investments, for example, and could afford to pay down some debts to improve apparant affordability; maybe funds could be transferred from a partner; maybe other credit commitments could be closed or restructured. A refusal to engage with borrowers who have unilaterally been declared by Amex to be in default is disgraceful.
This is not the way that I would expect a well-run consumer finance firm to behave, and American Express should be ashamed of itself. I see they are right-on-trend and present the world with a full D&I agenda to prove how cuddly they are as an organisation. Perhaps that’s just a smokesceen to hide the dismal way they treat their customers.
On a similar Amex thread, there were several examples of Amex suspending or closing people’s accounts just before they hit a big SUB. It was a bit odd.
As @jj says a Notice of Default, despite its name, doesn’t necessarily actually mean someone owes Amex money. It is simply the notice Amex is required to serve under s87 of the Consumer Credit Act 1974 to terminate the agreement for various reasons and the reason they say there is nothing you can do to remedy the breach is another requirement (under s88(1)(c)) because they have made a final decision they don’t wish to enter into any correspondence about the matter.
@JDB, what you say is completely correct from a technical perspective, but it’s extremely poor practice to refuse to allow a borrower to establish whether the facts on which the decision was based are accurate.
A few years ago, I attempted to validate the income verification model sold by one of the three big bureaux against proven information we held from payslips and banks statements. Our hit rate was less than 50%, and the bureau couldn’t improve it. Unsurprisingly, I canned the project and we still verify income the traditional way – our account manager openly admits that we would get the same results if we re-tested today. I don’t think it’s good for companies like Amex to make decisions that hugely affect people’s lives on the back of wobbly data with no right to appeal.
I wouldn’t authorise a business process like that, and neither would my Compliance colleagues.
@jj it quite likely isn’t any sort of income verification issue and the notice is a technicality behind which most card providers hide as they don’t want to reveal the true reasons for closing accounts a) to avoid some pointless arguments and b) to avoid giving specific reasons others might then use to circumvent their procedures.
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