M&S takes tough line on credit cards payments

Credit card borrowers are being aggressively chased by providers as soon as they miss a payment, even if they have good repayment records and owe very small sums.

A customer of one major credit card provider, Marks and Spencer Money, was contacted more than a dozen times over five days after missing an £11 payment. M&S demanded immediate payment over the phone or an exact date when the bill would be settled.

“I couldn’t believe all the calls I was getting,” said the cardholder, who did not wish to be named. “This was the first time I had missed a payment on the card. I had just got back from holiday and told M&S that I would make my payment in the next few days, which I did.”

M&S Money said that any of its 3m customers who fall behind on their monthly obligations – no matter how good their credit history – should expect similar treatment. “We need to be proactive, particularly in these economic times,” said Simon Coughlin, a spokesman for M&S Money.

“In many ways, it could be better for the customer, to prevent them from building up further charges.”

M&S Money’s actions come as banks are under increasing pressure to be more lenient with borrowers who fall behind with their repayments.

Lenders are working more closely with mortgage borrowers who fall into arrears and are now more reluctant to repossess properties in all but the most extreme circumstances.

The UK Payments Administration said that banks were being more “alert” to customers’ overall financialsituation and quicker to contact them if they missed a repayment on their debt.

“Credit companies are being more proactive and trying to intervene before the customer builds up debt,” said Sandra Quinn at UK Payments.

But Quinn felt the actions by M&S Money in this case went beyond the industry standard.

“I would not expect a customer to be phoned continuously if they have missed just one repayment . . . this is not industry standard,” she said.

“Customers can miss payments for many reasons, not all because they are in financial difficulty,” she added. “There is a balance to be drawn between helping your customer and harassing your customer. I don’t think this [M&S’s policy] is good practice.”

Which?, the consumer group, said it was reasonable for banks to give customers a “gentle reminder” if they missed a payment so that their debt did not pile up, particularly as borrower defaults are on the rise. But the group said that tactics to chase up late payments such as persistent telephone calls could be heavy-handed.

Credit card providers often advise customers that setting up a direct debit would provide greater certainty that minimum monthly repayments are met.

Meanwhile, banks have also started taking action to reduce how much they charge customers who breach their borrowing limits in advance of a court ruling on whether bank charges are too high.

This week saw NatWest and Royal Bank of Scotland pre-empt the ruling, making significant cuts to the fees that they charge for unarranged borrowing.

From next month, customers of RBS and NatWest will be charged just £5 for a bounced cheque or a returned direct debit, a fraction of the banks’ current £38 fee. The charge for paying an item when the customer has exceeded an agreed overdraft limit was also cut by half to £15 per day.