Hey Martin

hicskis

Overview

I would like to see a change in the Law where lenders are obliged to report a person’s true borrowings with all of the CRAs.

I believe it is grossly unfair that lenders have the choice of whether they report a person's borrowings (debts) to the Credit Reference Agencies (CRAs) or whether they do not - when by the same token lenders are supposed to be checking those very same credit reports to see whether a person is good credit (risk). This is a confusing contradiction.

See sections 3 “Credit Reference Agency” & section 4 “Credit Assessment” of The Lending Code 2009 http://www.lendingstandardsboard.org.uk/docs/lendingcode.pdf


The Lending Code 2009

In particular and I quote:

Para 34. “When customers apply for a lending product, subscribers should tell them when they may pass the customer’s details to credit reference agencies (CRAs) and the checks that subscribers may make with them.”

Para35. “Subscribers can give CRAs default information about a customer’s debts if:

• the customer has fallen behind with their payments
• the amount owed is not being disputed by the customer; and
• the customer has not made a proposal that satisfies the subscriber for repaying the debt following the subscriber’s formal demand.”

I have highlighted two words in the above paragraphs – may and can. This means lenders do not have to - and in reality don’t pass information of a person’s true borrowings to the CRAs i.e. the lender has a choice. If the lenders thought they had to by Law - then the appropriate words would be must and will.

The contradiction I refer to lies in the following paragraphs of the Lending Code*

Para 43. “Before lending any money; granting or increasing an overdraft, or other borrowing, subscribers should assess whether the customer will be able to repay it.”

Para 44. “For personal customers, this assessment should include consideration of information from CRAs plus at least one of the following three points:

• The customer’s income and financial commitments.
• How they have handled their finances in the past.
• Internal credit scoring techniques.“

Why is this important? Because if lenders are not reporting a person’s true borrowings to the CRAs then lenders cannot carry out proper checks. It means you may be being lent a load more money than you can truly afford.

*The Lending Code is a set of voluntary self regulatory rules written by the banks for the banks, and is enforced by the Lending Standards Board otherwise known as the British Bankers Association.

I believe that financial institutions are using this code to incorporate a contract term into every Consumer Credit Agreement and Personal Bank Account contract that permits, by a person’s consent, that the financial institution may or may not report a persons debts and account operation history to the CRAs.

I believe that is misleading under UK Law and is Unfair.

The Law

The Data Protection Act (section 10) states that:

”(1) Subject to subsection (2) an individual is entitled at any time by notice in writing to a data controller to require the data controller at the end of such period as is reasonable in the circumstances to cease, or not to begin, processing, or processing for a specified purpose or in a specified manner, and personal data in respect of which he is the data subject, on the ground that, for specified reasons -

(a) the processing of those data or their processing for that purpose or in that manner is causing or is likely to cause substantial damage or substantial distress to him or to another, and

(b) that damage or distress would be unwarranted”

A consumer under section 159 (1) of the Consumer Credit Act 2006 (as amended) can -

"A consumer given information under section 158 who considers that an entry in his file is incorrect, and that if it is not corrected he is likely to be prejudiced, may give notice to the agency requiring it either to remove the entry from the file or amend it."

This in my opinion gives an absolute right under two Statutes of UK Law for the consumer to have an accurate credit report with the CRAs.

The lender as the Data Controller is the only legal person that has the right to amend, alter or remove a person’s data with the CRAs.

It cannot be done by an individual with notice to the CRA - as the CRA must seek the Data Controllers permission to act.
The CRAs only store data. That is why a consumer is permitted under the Law to add a Notice of Correction to his/her credit file. But if the file is incorrect then the appropriate action would be to give the Data Controller (the lender) notice to amend, alter, or remove the damaging data as if that data is inaccurate and not relevant for the purpose then a Notice Of Correction does not achieve the desired result – to have the inaccurate data altered, amended, or removed.

As I see it I don’t see why a consumer must add a Notice of Correction when it is up to the Data Controller to have it accurate in the first instance. That means that clause 159 (1) of the Consumer Credit Act 2006 (as amended) would become invalid if tested in the courts because:

• A consumer cannot force by notice the CRA to remove or amend an entry in their file as the agency is not the Data Controller; and
• A consumer has the right to an accurate credit file in the first instance

Unfair Term

The term** that permits financial institutions to report what they may is to be found in every Consumer Credit Agreement and personal bank account contract in the UK as it is a guiding principal under the rules of The Lending Code 2009.

Regulation 5 of the Unfair Terms in Consumer Contracts Regulations (UTCCR)

Unfair Terms In Consumer Contracts Regulations 1999

5. – (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.

**Noname Banking Group companies may also tell CRAs how you run your relationship with them (such as whether or not you pay anything you owe on time), which may also affect your ability to borrow from other lenders. If you ask we will tell you which CRAs we have used so you can get a copy of your details from them.” - - Quoted from my Personal Banking Terms and Conditions applicable from 30 October 2009.

Section 140a of the Consumer Credit Act

“The court may make an order … in connection with a credit agreement if it determines that the relationship between the creditor and the debtor … is unfair to the debtor... “

Further Reasoning

I believe I have a right to an accurate credit file that I can build on in my life be it for loans, overdrafts, credit cards, or mortgages. I should be able to build a solid history that allows lenders to see that I can manage my affairs, and am therefore a good risk. That in itself should allow me to acquire more competitive rates over people with poor credit - an advantage.

However what I see - and I have the credit files in front of me - is a complete and utter abuse of the system by lenders. They report some accounts, not others - they report only to one agency and not all of them. When applying for credit some carry out searches others do not.

This is appalling. Why? It's all about profit. Lenders want us to have inaccurate credit files. It allows them to target borrowers who miss payments or go overdrawn so they can lend more -so they can charge more. It makes for good business. – but is grossly Unfair.

Disclaimer

This information about the law is designed to help users safely cope with their own legal needs. But legal information is not the same as legal advice -- the application of law to an individual's specific circumstances. Although I go to great lengths to make sure my information is accurate and useful, I recommend you consult a lawyer if you want professional assurance that my information, and your interpretation of it, is appropriate to your particular situation.

noh

This is appalling. Why? It's all about profit. Lenders want us to have inaccurate credit files. It allows them to target borrowers who miss payments or go overdrawn so they can lend more -so they can charge more. It makes for good business. – but is grossly Unfair

How does that work then?

Surely if all information had to be reported it would make targeting those who miss payments even easier?

MarkyMarkD

What a lot of cobblers.

The OP's point is basically saying that, if people lie about their borrowings to get more credit, they may sometimes get away with it, if their other lenders haven't registered the debts with a CRA.

Er, that would be the borrowers' fault for lying then. Not the lenders'.

hicskis

Quite the contrary - dear Watson - if lenders had to report true borrowings then those with bad credit histrory's may well be easier to target, but the banks would if they lent to them - be Negligent for doing so if that person couldn't afford it or the bank couldn't justify their actions.

Naturally there would be other SafeGuards in place to make sure that people can't lie when applying for credit such as supplying proof of what they earn (an employment contract) and evidence that they have been paid (bank statements).

oscar52

I agree with OP in some ways.

For instance - I have a CC with Natwest - it doesnt show on ANY credit file. This can be seen in two ways:

1) Its less accounts on my file and could mean I can get further credit elsewhere more readily. Even if I default, it may not be reported (though probably will)

2) by not reporting, the financial house is not reflecting a true picture of the persons liabilities. As above they could then get more credit, push themselves into difficulties and end up with numerous defaults. But is it the fault of the second "bank" for giving the "loan" or the fault of the first for not reporting outstanding debt

Thats essentially how I see OPs post anyway.

dunstonh

) by not reporting, the financial house is not reflecting a true picture of the persons liabilities. As above they could then get more credit, push themselves into difficulties and end up with numerous defaults. But is it the fault of the second "bank" for giving the "loan" or the fault of the first for not reporting outstanding debt

Isnt if the fault of the consumer for not having any self control?

oscar52

dunstonh wrote: »

Isnt if the fault of the consumer for not having any self control?

True, but that could also bring us back to the argument of desperate times, desperate measures.

and the other arguement of no one being able to predict the future - and not everyone gets paid enough to accumlate a "rainy day" pot. But then these arguements have been on here several times.

Premier_2

Big Brother is watching you ... only not closely enough some feel

esmerellda

you want to read the OFT consultation on irresponsible lending.

Irresponsible Lending Guidance - publication timetable
The OFT originally targeted the end of January/beginning of February 2010 to issue its irresponsible lending guidance, following a consideration of the consultation responses received. However, with a view to better co-ordinating with related initiatives being undertaken by colleagues at the Department for Business, Innovation & Skills (BIS) - and in order to be able to take account of such initiatives as the BIS review of the regulation of credit and store cards - we have taken the decision to postpone the publication of our irresponsible lending guidance until March 2010.
A summary of responses to the consultation will be published on or around the same time.

4.18 Failing to consider sufficient appropriate information relating to the borrower's circumstances to be able to reasonably assess affordability, prior to granting credit or increasing the total amount of credit provided.
This could include, but not be limited to:
h Where applicable, failing to consult relevant and accessible databases, as and when appropriate to do so.
h Where applicable, failing to take proper account of relevant information contained on databases. Relevant information would be likely to include, for example, information on credit reference files such as notices of correction.

hicskis

We may well be looking at a change in admisnistration then - after the election. I'm aware that there are consultations afoot - hence my campaign.

ThunderBird_3

One of the banks main arguments is that it#s the borrowers problem - if they get themselves into debt, but i see another side - if the banks give away money at 0% - that must be costing them - marketing, servicing, interest on what they give.

Surely some responsibility lies with them?