Is your credit score suffering and you don’t know why? Have you ever been promised things by a credit provider and let down? Your credit file is very fragile and the lack of transparency within the financial sector doesn’t help. Credit providers need to take responsibility.
Some credit providers are very eager to approve unsecured credit such as credit cards. With current interest rates for credit cards ranging anywhere from 14% to 20%, it’s no wonder that credit providers love credit cards and the income they generate.
It is interesting that even though interest rates in Australia are at record lows the interest rates on credit cards remain high, in fact in many cases they have actually gone up while interest rates on most other products have fallen. It is clear that many credit providers including the major banks have become highly reliant on this revenue source.
What is concerning is how easily some credit providers approve credit card applications, generally speaking, given the applicant’s credit file is clear supporting information consists of nothing more than what is gathered from an application form, often quoted income is not validated and based solely on what the applicant has entered. What is even more concerning is what is known as unsolicited increases. Most people that have a credit card would have received a letter from the credit provider offering to increase the credit limit. The approval process to increase the limit on a credit card is often nothing more than signing and returning a letter to the credit provider.
In these cases the credit provider would have no idea if their client’s financial situation has changed or if they are in a position to service more debt, some may call this irresponsible lending.
When considering the due diligence a credit provider will conduct with most other credit products such as a home loan or personal loan it is intriguing that so little checking seems to take place with credit cards. Some may suggest this is related to the high returns credit cards generate for the credit provider.
I acknowledge that people do need to take responsibility for their own actions however I don’t feel it is right for a credit provider to approve credit to someone where their ability to service the facility has not been verified and then aggressively pursue them for payment if they are unable to service the level of debt they have given, I believe this is called having your cake and eating it too.
When a credit provider provides credit without verifying the applicant’s ability to service the facility it could be considered maladministration or unconscionable lending.
In such cases, credit providers are standing on very shaky ground if they list a payment default as maladministration issues raised with the Financial Ombudsman are taken very seriously indeed.
Unfortunately, we see many negative credit issues recorded on peoples credit files when there have been genuine cases of maladministration on the credit providers part.
Once a default is listed it will remain recorded for a five year period. As other credit providers have no way of knowing if a listing is an accurate determination of events they will judge that person as guilty even though in the case of maladministration there is a genuine question to the validity of the listing. Credit providers need to take responsibility for the increasing number of people finding them in an unfavourable financial position. If you are looking for a loan provider that you can trust then we recommend the Australian Lending Centre. If your credit score has taken a hit, then there is no need to worry. Clean Credit can help if you get in touch. We specialise in repairing credit so you can get the loans you need again.