Barclaycard defends decision to cut customers’ credit limits by 95 per cent
Barclaycard has defended cutting some customers’ credit limits after a backlash from people complaining they had been reduced by over 95 per cent.
Some customers complained that their limits had been significantly reduced despite having never missed a payment.
It was pointed out that Barclaycard had made the reductions at a time when some people might need financial back-up.
Barclaycard response
Barclaycard said more customers had received credit limit decreases over the past year amid the impact of the coronavirus pandemic, but it added they represent a very small number of its overall customer base.
It said that as a responsible lender it must make sure people are not borrowing more than they can comfortably afford.
“As with many other lenders, our credit risk models take into account changes in the UK economy, as these may impact our customers’ ability to manage their borrowing effectively,” a Barclaycard spokeswoman said.
“Over the past year, we have had to take into account the ongoing economic impact of coronavirus, and this has resulted in an increase in the number of customers receiving credit limit decreases,” she continued.
“Having up-to-date credit risk models is part of our commitment to being a responsible lender, to help ensure that customers are not borrowing more than they can comfortably afford.”
“For some customers, where we don’t believe that their current limit is affordable, we provide information on how to appeal the limit change by verifying their income,” the spokeswoman stressed.
“When we reduce a customer’s credit limit, we will not reduce it to below their current balance, and we will ensure that they at least have sufficient headroom on their account to continue essential spending.”
Outrage on social media
One customer complained on Twitter yesterday: “Why, for seemingly no reason, have you slashed my credit limit by 96 per cent?? I’ve never missed a payment and pay way more than minimum payment.”
Another Twitter user wrote: “Having had a @Barclaycard for several years that I paid off every month without fail, they have now contacted me to say they are lowering my credit limit from £1800 to £250. Why? Its your loss as I have 3 other Credit Cards that I will now use instead!”
Credit score
Justin Basini, chief executive and co-founder of credit score service ClearScore, said: “Average credit limits by the end of December 2020 were down by almost half of what they had been at the beginning of the year.
“As Government support packages aimed at protecting consumer finances and access to credit come to an end, we are seeing some lenders, including Barclaycard, try to manage the financial uncertainty caused by the ending of these Covid-19 support packages by reducing credit limits substantially.
“This is in line with what we saw last year, as lenders sought to minimise their risk, with the number of credit products available to consumers dramatically reduced by 77 per cent between January and July, during the height of the first lockdown.
“However, sudden reductions in credit limits can have a negative impact on credit scores, as higher limits show a lender’s confidence in a person’s ability to pay back money lent to them.
Virgin Money last year
In May last year, Virgin Money reversed a decision to block some customers from making new purchases on their cards, saying it had listened to feedback and decided it was not the right time to make the changes.
It had previously emerged that some Virgin Money customers had received emails saying further spending on their credit cards had been blocked following a review of their accounts.