A spending limit applied out of the blue, because you’re in the red


Spending limit applied

Liam had a $1,800 spending limit placed on his account by his credit card company Credit Card Limited (“CCL”). Liam paid his credit card bills late in August, September and October 2013. Liam said that CCL did not notify him of the spending limit being placed on his account. This caused him embarrassment when he went to make a purchase, and the transaction declined.


CCL said that it sent Liam a letter at the beginning of November 2013, notifying him of the spending limit. Liam said he did not receive this, and thought it was strange because he had received other correspondence in the post from CCL at his address.


Liam said CCL’s terms and conditions did not allow it to place a spending limit on the card.


Liam said he paid $1,200 each year to have an unlimited credit card with CCL, and he was caused inconvenience by not being able to use the card as he usually would. Liam said he also missed out on being able to get the double reward points he would have received if he had been able to use the card as he usually did.


The complaint

Liam said he contacted CCL about getting a copy of the November 2013 letter sent to him and asked to speak to a manager, several times. When Liam could not resolve his complaint directly with CCL, he contacted FSCL. Liam said his complaint would be resolved if:

·                    either the spending limit was removed and he was compensated for the reward points he would have normally received based on his usual spending pattern, or

·                    the spending limit remained, but he received the average reward points and a refund of the annual fee.


CCL’s view

CCL referred to its terms and conditions which said that at its discretion it could decide and inform a customer of a credit limit being applied to an account. A credit limit amount would be the maximum amount which could be outstanding at any time. For all intents and purposes a ‘credit limit’ was the same as a ‘spending limit’.


CCL said that it conducted a credit review on Liam’s account, as it did on all accounts, to determine whether the level of credit was suited to him, based on his previous payment history. CCL said it applied the spending limit on the account because of Liam’s late payments of his credit card bills in 2013.


A quick negotiated settlement

We reviewed the terms and conditions. In our view they allowed CCL to place the spending limit on Liam’s account because of his late payments.


However, we thought there were some shortcomings in CCL’s service because it did not contact Liam by telephone before placing the spending limit on his account, and could not produce a copy of the letter it said was sent to Liam in November 2013.


We outlined this to CCL and it offered Liam either 30,000 membership points or an account credit of $500. Liam accepted the account credit of $500 but said he also wanted to receive a copy of the letter CCL said it sent to him in November 2013.


CCL was unable to locate the letter, but was able to provide a copy of the template letter it would have based the November 2013 letter on. This resolved Liam’s complaint.


Lesson to be learned

It is a good idea to pay credit card bills on time, and a responsible lender should take steps to ensure a customer does not find themselves in a situation where debt is escalating. However, placing a spending limit on an account without sufficient notice by a credit card company was not, in our view, best practice.


This complaint may have been avoided if CCL had made a quick telephone phone call to Liam before it placed the spending limit on his account.