Ignoring 3-cent balance leads to mortgage denial

January 6 2013 by Ellen Roseman

Diane Lowe is paying thousands more in interest on her mortgage, all because she didn’t pay a few cents on a credit card she had already cancelled.

As I reported last month, Capital One reported an outstanding balance on a Hudson’s Bay credit card to Equifax Canada. It was only a few cents, but it wasn’t paid.

As a result, Diane Lowe couldn’t get the mortgage she wanted on her new house. Nor could she get a line of credit to pay a deposit to the builder.

She learned about her blemished credit, as many people do, when applying for financing. The bank pulled the rug from under her, forcing her to find another lender in a hurry.

Many readers felt the credit reporting system needed reform. Why send damaging information to a credit bureau before trying to clear things up with the customer? Some people reported having similar experiences with the Bay. See their comments below.

I also wrote a column about extended warranties, a popular and profitable sideline for retailers. That brought some interesting responses as well (see below).

Finally, I’m giving a copy of my new book, Fight Back, to the reader who responded within seconds to my offer. Congratulations, Alya.

Stay tuned for more book giveaways.

13 comments

  1. Bob

    Jan 6 2013

    “You guys are spending 67 cents to mail me an invoice for six cents.”

    It’s unfortunate that a perfectly reasonable comment can cause such harm.

    Why can’t credit card companies build in reasonable checks to their card accounts?

    Diane Lowe is correct – it is stupid to spend postage to ask for payment on a six cent bill.

    The company could program its computer to not send billings if [1] there is no account activity for a defined time period and [2] the balance is less than a predetermined amount – say, fifty cents, or even one dollar.

    And to report to the credit bureau as delinquent an account with a 6 cent balance is almost criminal.

    Are there not libel laws or some such that would allow her to charge them? They are significantly damaging her reputation. How do we stop this?

    This reminds me of the past practice of sending out credit card statements with a payment due date of a Saturday or Sunday. The company charges interest when the bill is paid on the Saturday or Sunday, claiming that it wasn’t a valid business day, so it was assumed paid the following business day and – thus – was late. [I note that this practice has now been stopped through legislative changes].

    This wasn’t criminal, but the card companies [especially banks] knew which calendar days were, for them, valid business days [check how they calculate interest on loans].

    It must have been so easy for them to change the computer programs once the legislation forced them to.

  2. Another person named Lowe

    Jan 6 2013

    Your piece in the Star prompted me to share with you a remarkably similar series of events.

    Just over a year ago, my wife made a number of purchases at the Bay on her Bay card. On Dec. 28, 2011, we left for our winter home in Florida, not having received a statement yet.

    Anticipating the Bay’s billing, I added up the sales slips and sent in a cheque for the total. Unfortunately, I paid an amount that was $0.10 less than what we actually owed.

    Returning home in June and going through the accumulated mail, I noted a balance owing of $0.10. I decided to ignore it as not worth the stamp to mail in a cheque.

    This Christmas, we again shopped at the Bay and were informed at checkout that our Bay card had been cancelled for “lack of use”.

    We were invited to reapply on the spot at the checkout. After much delay, we were refused.

    We learned that we were not dealing with the Bay, but with Capital One, and that our non payment of the balance owing had compromised our credit rating.

    Like Diane Lowe, I immediately responded, “no wonder the Bay’s losing money.”

    I am now on Internet banking and decided to pay the balance of $0.10, plus an additional $0.15 on the account.

    We spoke to Capital One and subsequently received a letter stating in part “we will be contacting the credit reporting agencies Equifax and Trans Union requesting that the account tradeline for this account be corrected to reflect a rating of R1, paid, account closed” (whatever that means).

    As we are retired and have no need of credit, we have not experienced any actual loss.

    Our sympathies to our unrelated namesake who suffered grievously from the high handed actions of Capital One.

  3. RS

    Jan 6 2013

    I just wanted to applaud your business muckraking articles in the Star.

    I find them very cathartic to read, and also reassuring to know that someone still takes note of the dishonesty and incompetence in the consumer sector, and actually chases some of it down.

    It seems to me there’s been, in the past few decades, a steady deterioration of integrity and competence in the way companies conduct themselves, and at the same time less and less criticism of it.

    Yesterday’s story concerning the HBC card hit home. I had such a colossal headache with them recently.

    I was making a fairly large purchase at the Bay (where I haven’t shopped for about 15 years) and the saleslady kept pitching the HBC card aggressively, even though I kept saying “no.”

    She assured me I didn’t even have to use it to make the purchase, and if I did, it was easy to pay off online.

    Wrong immediately — I did have to use it. When I got my card in the mail a few weeks later and went online to pay it off, the URL didn’t work.

    Then I called, but couldn’t reach an actual human being. I went to the Bay to pay it off (so aggravating! Do they do this on purpose to get you back the store to buy more?) and the saleslady had to connect me to someone on the phone who was incoherent.

    They kept saying something about “paying my annual fee” even though I was paying off the balance and closing the account the same day I activated the card! Even the saleslady thought it was ridiculous.

    I was told my account was closed and I’d be getting a confirmation letter in the mail. Then a few weeks later, I got an account statement saying I owed nothing, but the account still appeared to be open.

    So I called again and was told my account was closed and a confirmation would be sent. Still haven’t got it.

    They just seem massively incompetent, unapologetic about the hassle they cause people, and generally indifferent. Grrr!

    I hate to say it, but I find this to be the norm, rather than the exception, in the way things are now done. I’m old enough to remember a quite different world.

    In order to minimize aggravation, I avoid as much as possible all dealings with large companies. I sometimes think they count on this effect to keep consumer complaints to a minimum.

    Anyway, glad you’re writing about it. I imagine fewer and fewer publications will even publish this kind of article, given their economic ill health and sensitivity to displeasing corporate sponsors.

  4. CP

    Jan 6 2013

    I had a similar experience, where I was offered a discount on my purchase if I applied for Bay credit card. I applied and, to my surprise, I was denied.

    Weeks later, I received a letter from Hudson Bay/Capital One stating, “After careful consideration, we have determined that we cannot approve your application at this time. Our decision was completely or partly based on information contained in your credit file, which we obtained from the following credit reporting agency.”

    This agency was Equifax. I proceeded to call them and after some frustration and being bounced from phone number to phone number, I decided to go to their website and purchase my credit info for $23.95.

    They offer a free credit service but make it difficult for the consumer by (1)requesting two pieces identification which need to be sent into their office and (2) waiting for snail mail to deliver a report to your address.

    I discovered that my credit score was 767 and rated excellent, with no delinquencies, according to the report.

    I still don’t know why Capital One refused my application, since they had referred me to look into what I thought was a bad credit report. I found this whole process to be very
    embarrassing and frustrating.

    This whole sequence of events makes me wonder if Capital One and Equifax are scaring consumers into thinking they have credit issues and persuading them to purchase their credit score information.

    They can make a lot of money by selling this info. They are sitting on a gold mine of idle information.

    I am in my mid-50s and have never had credit issues or even had the need to check my score prior to this situation. I’m wondering if any of your readers have experienced a similar situation?

  5. WW

    Jan 6 2013

    My wife had a similar experience lately, also with HBC.

    When we were away from home for a time in September, she was late paying her balance. The result was a credit charge of $1.57 – so far, so good, as this is a legitimate charge.

    However, she decided not to write such a small cheque, choosing instead to include that amount when paying for her next purchase. Wrong!!

    When she tried to make a purchase at a Home Outfitters store in early December, her card was rejected.

    The clerk, of course, could not give her any information. So she left the purchases on the counter, came home and called their accounts office.

    The rigid response was that she had to pay the small amount before she could use the card again. Telling the person that, starting with a Zeller’s account in the late 1960s, we had had a Bay/Zeller’s card for 45 years, didn’t help.

    So my wife put the cut up card and $1.57 in an envelope and sent it to them with a scorching letter.

    The only response was a form letter telling her that the account was closed, and they had so informed “credit authorities”.

    I cannot understand why there is so little common sense used in the collection departments of major companies.

    Perhaps it is because they use independents to handle their accounts. Or perhaps they pay so little that they don’t get employees with the ability to make sensible decisions. Or perhaps they apply such rigid rules that the collections people are not allowed to make decisions.

    They spend more to collect negligible accounts than the accounts are worth, yet they will give a new credit card to almost anyone.

    There, I’ve said it and it’s off my chest!!

  6. DW

    Jan 6 2013

    Extended warranty programs for any product — from vehicles to handheld PDA’s — are an extremely profitable business for the retailers and the insurance companies behind them.

    A typical policy type will have loss ratios and expenses (based on my personal experience in the product, which may be dated) of around 50 per cent.

    They are a big money maker. And if you are willing to play the odds, I am almost certain that across a broad line of products in your home, you are better off taking the risk yourself. You will save money.

    The positioning of the product is all about emotions: specifically fear.

    At time of purchase, you have just spent good money and they prey on your fear.

    The product is turned into insurance and in many cases, taken offshore to earn profit tax-free.

  7. JC

    Jan 6 2013

    I purchased a Mac Airbook from Apple in October 2011, as a birthday gift for my son. In the interest of full disclosure, he’s a Toronto police officer and it was for his 30th birthday.

    At the time of purchase, I was advised to take the $279 extended warranty coverage. I asked what this covered and was told that it covered anything that could go wrong with the laptop.

    Recently the Mac Airbook was damaged. Again in the interest of full disclosure, my son’s exuberant German shepherd dog knocked over (with his tail) a glass of wine, which spilled on the laptop. The screen stopped functioning.

    The funny thing is that the laptop still works when plugged into my son’s TV. The TV now functions as the “screen” for the laptop.

    My son took the laptop into an approved Apple repair store and was quoted a repair cost that equalled the original cost of the laptop.

    My son phoned me (rather embarrassed by the whole thing) and I said oh, but I purchased an extended warranty plan for 3 years.

    Upon calling Apple, I found out that the warranty does not cover any “accidental” damages to the laptop.

    I said I had been told the extended warranty covered anything that could go wrong. The representative said yes, but not accidental damage.

    I feel that even though I asked the right question, I was given the wrong information when I purchased the extended warranty.

    I wanted to register a complaint with Apple, but after speaking to 3 representatives, I was given the same website that does not allow you to register a complaint unless it is about a specified problem.

    Firstly, I am really upset about the incorrect information when I purchased the laptop and secondly, outraged that the laptop cannot be repaired for a reasonable price.

    I am a retired senior and this was a huge outlay for me. I cannot believe that my son is the first person to have had liquid spilled on his laptop or have an accident with a laptop.

    I also had rather rude responses from Apple customer service and IT support. I was honest when explaining what had happened.

    One representative responded with “Madam, that’s like saying the dog ate your homework.”

    Another one finally admitted that while you can get an accidental damage warranty for an iPhone, tough luck with laptops.

    Wow, I have until now admired Apple and its representatives. I am using an IPad for this email. But I will think twice about purchasing from Apple in the future.

    How can a lowly consumer actually register a complaint with the mighty Apple?

  8. BM

    Jan 6 2013

    I am always annoyed when the clerk offers me an extended warranty. l often ask, “What is the matter with this product that you don’t expect it to work for more than a year?”

    The clerk doesn’t know what to say and doesn’t push the additional sale!

  9. Marie

    Jan 7 2013

    A number of years ago, I visited a big box electronics store to shop for a refrigerator with a built-in water/ice dispenser.

    The young sales “associate” ran down all of the features, then gave me the hard sell about an extended warranty “since water and electricity are a dangerous combination”. I thanked her and left the store.

    A few days later, I went to a different branch of the same company to take another look at the same model. Once again, the young fellow listed all of the features, ending with the extended warranty pitch because “water and electricity are a dangerous combination”.

    It was déjà vu all over again!

    Family members who have worked for the same and similar companies have told me that the training course is very light on knowledge of the actual products, but heavy on pushing the warranty. Indeed, many of the employee benefits and incentives are based on warranty sales, even on items that have very little chance of failing.

    I try to balance the expense by purchasing warranties on large appliances — the best ones have features such as yearly inspection or cleaning, or a partial refund on the next purchase if the warranty has not been used — and by taking my chances with less expensive and expendable gadgets.

  10. PB

    Jan 11 2013

    If a credit score turning sour after a 3-cent balance makes news, then, surely, it’s the credit bureaus or the credit raters that are at fault.

    I too have a collection issue where I refused to pay $300+ that I did not owe.

    The company refused to contact the credit bureaus and I refused to pay the bill.

    While having various cards with credit amounts totaling well over $100,000, which I pay off each month, I find that CitiBank and and Amazon.com won’t issue me a card. This means I can’t partake in a 20% discount.

    Ellen, take the guilty ones to task to expose their inflexibility in the light of logic, truth and reality.

  11. Alexa Tavares

    Jan 15 2013

    Hello Ellen,

    The story regarding the unpaid $0.03 charge is truly maddening!

    Is there no one at the bank who is empowered to take a second look at a denied mortgage application and push it through when the reason for the denial is so trivial? This question must be asked!

    In the coming weeks, I’ll be visiting my local branch to apply for a mortgage, but I fear I’ll be the subject of this same sort of nonsense.

    Why? A few months back I paid my Bell Mobility invoice a couple of weeks late (the first time I had been late paying them in over three years). Totally my fault, since I tucked away the invoice and forgot about it.

    Upon realizing I was late, I immediately paid it online and called Bell’s A/R dept to confirm payment.

    I casuallly asked the agent if this would affect my credit report and she responded that Bell Mobility does indeed report any sort of delinquency to Equifax.

    Does this mean I’m screwed in terms of my mortgage application?

  12. Ellen Roseman

    Jan 15 2013

    Hi Alexa, I don’t think you’re in any danger with your mortgage. Being a few dats late on one bill can’t make a real dent in your credit score.

    The problem is when you ignore a bill for several months, as Diane Lowe did, and you don’t call the creditor to dispute it.

    A history of non-payment is the thing that endangers a mortgage application.

    So, as long as you pay on time most of the time, you’ll be OK.

  1. Jan 21: Best from the blogosphere « Save with SPP

Leave a comment