Bank complied with obligations before referring debt to collection agency

Categories:

Vulnerable customers and hardship decisions, Bank decisions, Lending,

Summary:

Charles began struggling with repayments on his credit card in 2024 after a big drop in income. He said he stayed in regular contact with the bank and kept it updated about his financial difficulties. In September 2025, however, the bank sent the debt to a collection agency. Charles complained that the bank had failed to offer any solutions to his financial difficulties and referred the debt to a collection agency without warning.

Published:

April 2026

Our investigation

The Credit Contracts and Consumer Finance Act 2003 allows borrowers who cannot reasonably meet repayments because of an unforeseen event to ask their lender to change the loan contract to enable them to meet their repayments. Lenders must consider such requests, but do not have to agree to them.

We found the bank complied with its obligations under the Act. The bank gave Charles information about applying for hardship relief early on and repeatedly highlighted how he could obtain independent budgeting support. Charles applied for hardship relief twice in late 2024, but on both occasions the bank needed further information from Charles but was unable to reach him to get it. It left voicemails and sent emails explaining it could not proceed without hearing from him. It turned down both applications on the basis that he did not provide the extra information it needed. Charles withdrew a third application in early 2025 and instead sought an alternative repayment arrangement, to which the bank agreed. However, he did not stick to this new arrangement.

In May 2025, the bank emailed Charles about unpaid arrears and warned him it could refer the debt to an external agency if the arrears remained unpaid. It then sent two letters, in July and August, each demanding repayment of the overdue amount, pointing out the risk of reporting a default and the impact on his credit file, and offering budgeting support. Charles did not pay the demands. We found the bank met its obligation to give a clear warning of the risks and consequences of Charles’ debt being referred to an external collection agency.