Important reading for all credit customers!

[Deleted User]

Dear MSErs,

I've had a bit of a bad experience with Abbey recently, but have fortunately managed to resolve it for the better after many months of trying. As part of this, I've learnt some really interesting things that affect ALL credit customers - that I don't think have been posted on here before - so I wanted to share them with you.

This really isn't teaching anyone to suck eggs; it's new tactics for challenging your creditors.

This post isn't short, but please do read it as it could help (I hope!).

---

In August 2007, the Office of the Information Commissioner (https://www.ico.gov.uk) issued Technical Guidance to all Lenders setting out the standards by which they must behave when managing customers' data and - more importantly - how they should act when sharing this data with Credit Reference Agencies like Equifax and Experian.

Back in the days before the Data Protection Act 1998, lenders behaved according to the "Principles of Reciprocity" which are the guidelines they drew up and adhered to governing how they update customers' credit reports - and what data is shared between them all.

When the Data Protection Act 1998 took effect - and subsequent amendments in 2000 - all companies and bodies that processed 'personal' information became legally bound to process that information according to 12 key rules. One of these rules is that information must be processed 'fairly'.

The guidance issued in 2007 to all lenders set out to examine the concept of 'fair' and to clarify how lenders should be sharing information with credit reference agencies.

The ICO issued this guidance because different lenders were acting in different ways by marking credit reports inconsistently. As an example, Bank X might issue a default against a customer if no payment was received within 30 days, whereas Bank Y might be happy to wait for 90 days before issuing a default.

The crucial bit here is that the Office for the Information Commission has stated that if a lender is acting inconsistently with the general practice of other lenders, in the way that it passes over information to the credit reference agencies, then that lender is processing data 'unfairly' and is potentially breaching the Data Protecting Act.

Why is this important?

Because, aside from having remedies with the FSA and Financial Ombudsman service, you can also challenge adverse information on your credit report by reporting the lender as having breached the Data Protection Act, following this guidance.

Your first port of call should be to read this document:

http://www.ico.gov.uk/upload/documents/library/data_protection/detailed_specialist_guides/default_tgn_version_v3%20%20doc.pdf

It helps define what a 'default' is and when it should be applied, with the aim of standardising some of the terms used by lenders.

This is a big issue - and my own example will illustrate why.

I have a personal loan with Abbey. Through no fault of my own (a problem with their IT system, which they've accepted responsibility for) I received three late payment markers against three different months, on my account.

Abbey also placed an 'Arrangement to Pay' on my account for one month, as a punitive measure for me being late in paying repeatedly.

The first thing to highlight is the obligation that lenders have to process your data fairly. This means that:

They need to act consistent with other lenders
They need to act consistent with their own actions

So, for example, if Bank X's standard procedure is to issue a default after 30 days, but most other banks don't until 90 days, then Bank X is processing your data unfairly. You can report them to the ICO for this breach and they will be obliged to update your credit report and remove the default, as that data wasn't processed in accordance with the Data Protection Act.

Alternatively, if your bank marks your credit report as being late one month (say you pay 10 days late) but then the next month it doesn't (and you've paid 11 days late), then it's not processing your data fairly as it's acting arbitrarily with regards its decision on whether to mark your credit report adversely or not.

Definitely read the report I've included. It also sets out common definitions for things like defaults and arrangements to pay - and if your bank has issued either of these in a way that doesn't fit the definitions the ICO has outlined, then it may be that your lender has breached the Data Protection Act for processing data unfairly.

And finally, why is this 'unfair'?

It's unfair because two different people who have acted identically, may end up with very different credit reports just because of who their lenders are.

If you end up with lots of adverse information on your report, then you are less likely to be able to access credit, whereas someone else who has behaved exactly the same as you may have a better report, just because their lenders are more relaxed.

Some caveats:

This guidance probably won't help everyone. Lenders are still entitled to pass over adverse credit information, and if you're misbehaved financially then this won't help you.

What it will do, though, is help you remove adverse credit from your reports if your lender is being harsher than most other lenders are. If they are penalising you for the smallest things, or being draconian in their actions, they may be processing your data unfairly.

I hope this is useful...!