MSE News: Credit application system is flawed, MPs told 27 October 2009 at 6:11PM in Credit Cards 21 replies 3.1K views

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Borrowers are missing out on the best deals or paying too much for credit due to flaws in the application process, MPs were told today ..."

Read the full story:
Credit application system is flawed, MPs told

esmerellda

Good work there Martin.

Not sure that Vivienne (OFT) did say they'd investigate, more that they needed to look at the evidence before doing anything and they had a number of other prioritys which probably overlapped (high cost credit etc which has been ongoing for months)

Some excellent points made by the committee and all involved

ghanagirl

Tell me about it. got refused, when i checked the form they filled in my address and birth were wrong on experian.

MSE_Martin

esmerellda wrote: »

Good work there Martin.

Not sure that Vivienne (OFT) did say they'd investigate, more that they needed to look at the evidence before doing anything and they had a number of other prioritys which probably overlapped (high cost credit etc which has been ongoing for months)

Some excellent points made by the committee and all involved

Were you there - you should've said hi

esmerellda

Sadly no, I watched it live on Treasury TV on the PC while doing some work. (well its more interesting than Jeremy Kyle isnt it)

Think you still can watch it - http://www.parliamentlive.tv/Main/Player.aspx?meetingId=4918&wfs=true

Think you and Toby? did well, not the most positive of openings from the committee.

Innocent_Guy

Well done.....:D

fruugal

The credit rating system needs to be overhauled anyway as it is largely designed and paid for by the banks for the banks and therefore has little care of the consumer - hence the footprint which was thought to indicate a desperate person trying to get too much credit in a very short time.

The credit ratings need to only show credit which is applied for not just credit that is tested to see what it would yield as an offering.

Does this in any way come under the consumer credit act where the consumer is given a cooling off period?

Could it be amended to enable people to have a cooling off period before anything appears on their credit file and then only apply it to the credit file when the loan is granted?

I've found the credit reference agencies get things quite badly wrong and need managing!:rolleyes:

PROLIANT

The current system is a honey-trap, lenders should soft search you and give you a decision i.e. Yes or No then if you agree to the loan/card/finance then and only then should a hard search be made thus indicating to other lenders you have taken on a new financial commitment.

This tosh about "risk" and "fraud" is loaded and another excuse for banks to get out of doing something positive for the industry and of course change.

Here is an example of how I see it would work:

Borrower applies for a loan with Bank 1 and an unrecorded enquiry is made with Experian, the computer says yes and agrees the loan amount and APR, the borrower accepts this and signs the loan terms electronically, subsequently a footprint is now left on the borrowers Experian credit report with an indication of the amount committed to.

Now, the same borrower applies for another product with bank 2, a soft search is done and the score card decides the borrower has reach their maximum level of affordability, the bank declines the application and the application process ends there, no hard search done.

This can be done with existing Credit Checking Applications with all three Bureaus so there is no massive investment in software re-writes, upgrades et al, it can only be a win-win situation for both the bank and the borrower, it can even be seen to protect both banks and consumers against fraud as a high level of hard searches would indicate a high level of commitment to credit in a short period of time which would trigger fraud flags through data analytics of some description.

never-in-doubt

Being Martin fights so hard for this (good job too), maybe the next step would be to get the CRA's regulated by an official body. I mean they keep hiding behind their own rules that it is now tiresome.

Regulated would mean they would have to remove any questionable data brought to their attention by the customer, until the lender verified it was accurate. If the customer continued to deny the lenders pov then the governing body would look into things.

ICO have no legal powers to fine or punish the CRA's which kinda says it all - they continually (millions of times a day) break DPA and still remain untouchable. Yes the moment a bank or insurer loses customers data there is uproar!

Double Standards.....

So, my appeal is to get MSE to appeal to the government to enforce regulation over the CRA's by a body with the power to fine and punish the CRA and lender when incorrect data is presented between their systems.

never-in-doubt

Excellent points and theory mate - nice one :T

One thing i'd add though (to protect the lender - shock horror coming from me of all people lol) is that if the 1st loan went through, the person could in theory do 3 more applications that same day all getting accepted.

So, to combat this, i'd suggest that the same process is followed but whereby you confirm the loan, the lender updates the CRA in real time to show the account the moment they allocate it a number. This is actually better than the current set-up whereby you can apply for a mortgage and loan the same day and get both thus excluding the loan from the deductable income element of the mortgage.

However - good post Proliant :T :T

PROLIANT wrote: »

The current system is a honey-trap, lenders should soft search you and give you a decision i.e. Yes or No then if you agree to the loan/card/finance then and only then should a hard search be made thus indicating to other lenders you have taken on a new financial commitment.

This tosh about "risk" and "fraud" is loaded and another excuse for banks to get out of doing something positive for the industry and of course change.

Here is an example of how I see it would work:

Borrower applies for a loan with Bank 1 and an unrecorded enquiry is made with Experian, the computer says yes and agrees the loan amount and APR, the borrower accepts this and signs the loan terms electronically, subsequently a footprint is now left on the borrowers Experian credit report with an indication of the amount committed to.

Now, the same borrower applies for another product with bank 2, a soft search is done and the score card decides the borrower has reach their maximum level of affordability, the bank declines the application and the application process ends there, no hard search done.

This can be done with existing Credit Checking Applications with all three Bureaus so there is no massive investment in software re-writes, upgrades et al, it can only be a win-win situation for both the bank and the borrower, it can even be seen to protect both banks and consumers against fraud as a high level of hard searches would indicate a high level of commitment to credit in a short period of time which would trigger fraud flags through data analytics of some description.

Chrysalis

The misadvertised APR and frequent application things both need to be scrapped.

As well as sending out approval letters to people who are not approved but simply invited to apply.