Consumer complaint received 2023-03-15
Company: Upgrade, Inc.
State: NC
Product: Credit card or prepaid card
Sub-product: General-purpose credit card or charge card
Issue: Other features, terms, or problems
Sub-issue: Other problem

Complaint:
Upgrade, Inc recently reduced my Upgrade Card limit in an unfair and deceptive manner which appears to take advantage of FCRA, UDAAP, and Credit Risk Reporting regulations. Based on their use and manipulation of third party information received from XXXX, my credit card limit was abruptly reduced to zero availability even though my account has maintained less than 50 % utilization for the life of the account. Not only was the account on auto payment and below 1 % utilization for months, but it appeared that my account was manually reviewed outside of the payment cycle. 

Without warning, Upgrade sent an email notification on Friday, XX/XX/XXXX at XXXX noting that my credit line was being reduced. 

Per an email sent from XXXX : During our regular review process, we noticed a recent change to your credit profile. As a result, your total credit line has been lowered to $ XXXX. This does not affect the terms of any existing balances that you have from prior transactions that you have already made on your account. It's important to continue to make your monthly payments on-time as failure to do so may affect your credit score. Your required payment continues to be the monthly payment amount, even in cases where your existing balances may exceed your new line amount. 

Additional research on my part led me to the Adverse Action Notice Line Reduction letter that was posted in the Upgrade app on Saturday, XX/XX/XXXX. This in itself feels like a TIL and FCRA violation related to timely disclosures. 

The letter stated : Thank you for opening your Personal Credit Line from XXXX XXXX XXXX through Upgrade , Inc. Based on an internal review, your credit line has been reduced to $ XXXX, for the following reason ( s ) : Serious delinquency. Length of time accounts have been established. Proportion of balances to credit limits on bank/national revolving or other revolving accounts is too high. Proportion of loan balances to loan amounts is too high. 

I sent an email to customer service to challenge the findings and ask for the specific details in my credit report that aligned to serious delinquencies on bank/national revolving accounts? 

The above reasons cited are not correct. After reviewing my XXXX credit details, and other updated documents posted to the Upgrade app, it appears that the posted Upgrade Card Personal Credit Line Agreement as of XX/XX/XXXX references a number of terms and agreements that can easily used to unfairly reduce credit limits or adjust interest rates for customers who use the Upgrade Card. 

As a customer and a consumer, it appears that Upgrades consumer loan and credit lending products are not fully segregated and that the practice of requesting and reducing credit limits based on Covered Draws, reliance on inaccurate credit profile data, and other risk-based rules can lead to a number of unfair credit line decreases ( CLDs ) that can force account utilization up to 100 % without warning and negatively drop credit scores XXXX - XXXX points with most reporting agencies. 

Credit line decreases ( CLDs ) that leaves zero ( 0 ) availability on a credit account should be covered by a policy that requires consumers to be notified in advance and given at least a ( 1 ) 30-day notification of the pending decrease ; ( 2 ) the option to quickly pay down an account prior to the credit line decrease to offset utilization; and ( 3 ) possibly additional reporting measures that favorably reports utilization for a period of time. 

The above practice of credit line decreases ( CLDs ) can inadvertently generate a large amount of consumer credit risks for unsuspected card holders. My credit score would have been harmed and impacted for months if I did not make double payments to avoid Upgrade from reporting my account with 100 % utilization. The knock-on effect of my Upgrade account would have undoubtedly triggered other lenders and creditors to follow suit. 

Because of the potential cascading effects of how Upgrade appears to manage consumer credit risk, Im seeking evidence that proves I was not unfairly targeted and that the credit risk model that flagged my account for a 100 % credit line decrease ( a limit reduction down to my latest statement balance ) is fully automated within the Credit Risk organization and shows that other customers with a similar credit score, DTI, tier, or other income factors received the same type of reduction. 


In a CFPB posted article from XX/XX/XXXX Credit Card Line Decreases the following was noted : If additional research could enhance our understanding of credit line management and its impact on consumers. This may include analyses that compare CLDs caused by consumer risk with those driven by institutional risk management, or the influence of regulatory changes such as the CARD Act of XXXX. Research could also explore the role of adverse action notifications on CLD transparency, and how credit line management practices vary among credit card issuers. 

I gave Upgrade 3 business days, then 7 business days to review my credit report and reply with evidence. I was called on XX/XX/XXXX ( 2 weeks later ) and told that if XXXX reported errors related to my credit score, t

hey will have to resolve it. I never received details from Upgrade on the account and I dont understand their use of third party data. Thank you for any help given. 

Regards, Concerned Upgrade Cardholder

Company response to consumer: Closed with explanation