In May 2003 Beth missed a payment to her credit card provider, Buy-It Limited (“Buy-It”) and incurred a late payment fee of $26.15. Beth contacted Buy-It to say she missed the payment because she had not received her monthly statement. Buy-It accepted Beth should not have been charged a late penalty fee.
When Beth received her next monthly statement she deducted $26.15 from her payment as a way to reverse the late payment fee. However, Buy-It had already reversed the fee by crediting Beth’s account. This meant that Beth underpaid her account by $26.15.
In December 2003 Beth realised the error and sent Buy-It a cheque for $26.15. Beth asked Buy-It to reverse any associated charges to her account as a result of the error. However, Buy-It did not respond to Beth’s letter and did not reverse the interest that had already accrued on the outstanding $26.15.
Beth continued using her Buy-It card and paid her account monthly. Although compound interest was still accruing on her account and Beth contacted Buy-It several times about the matter, Buy-It did not reply. In December 2014, Beth decided to stop using her Buy-It card and to stop making monthly payments in an attempt to elicit a response from Buy-It. Buy-It did contact Beth but they were unable to reach a resolution and Beth brought her complaint to FSCL. By this time, Beth considered $10,310.86 in interest had accumulated on her account as a result of the missed $26.15 over eleven years earlier.
Beth’s view
Beth’s view was that Buy-It should write off the full $10,310.86. Beth argued that Buy-It had known about her complaint since December 2003 and her account should not have accrued interest for such a long time.
Buy-It’s view
Buy-It considered Beth responsible for all the arrears. Buy-It said that the current arrears balance on Beth’s account did not accrue only from the missed payment of $26.15. Buy-It said that since 2003 Beth had missed other payments and these missed payments, along with compounding interest on the missed payments, accounted for the majority of the amount in arrears.
Buy-It argued the arrears had accrued solely as a result of Beth’s action and that she needed to pay $10,310.86.
Review
It was clear from Buy-It’s terms and conditions that it had the contractual right to charge interest on any unpaid amount. However, the fact that Buy-It had that contractual right was not determinative in this complaint.
Outstanding complaint
Beth had written several letters to Buy-It trying to rectify the issues from December 2003 onwards. Beth had also called Buy-It several times in an effort to resolve the issue.
Buy-It was on notice from December 2003 that Beth had a complaint. It would have been prudent for Buy-It to freeze the account arrears as at December 2003, and to determine whether the arrears were payable by Beth or not.
Missed payments
We reviewed Beth’s Buy-It credit card statements from June 2003 onwards and found that the current arrears balance could not have accrued only from the missed payment of $26.15. The statements showed that generally Beth paid all of her Buy-It accounts on time. However, there were some payments that Beth had either missed or paid late. It was difficult to unwind exactly what proportion of the current arrears was due to Beth’s missed and/or late payments and how much was due to the interest accruing on the unpaid arrears balance from December 2003.
Buy-It said that only a very small percentage of the total arrears was the result of the missed $26.15 amount from 2003. However, Buy-It offered to settle the complaint by writing off $9,010.86 of the arrears. This meant Beth still needed to pay Buy-It $1300.
With the additional information we had received about other missed payments we considered Buy-It’s offer to be reasonable and so did Beth. Beth agreed to pay Buy-It $1300 in full and final settlement of the complaint and we discontinued our investigation.
Lesson
While we accepted that only a portion of the arrears balance could be attributed to the missed $26.15, we found it was unreasonable and unfair for Buy-It not to respond to Beth’s complaint. Further, we found Buy-It was irresponsible for allowing Beth’s account to continue to accrue interest for such a long time.
Under our terms of reference, all participants must have a robust and compliant internal complaints process. We expect all complaints to be acknowledged within 1 – 2 working days and, ideally, to be fully resolved within 20 working days.
