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ICO/SCOR - Principles for the Reporting of Arrears, Arrangements and Defaults

edited 4 July 2015 at 8:24AM in Credit File & Ratings
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edited 4 July 2015 at 8:24AM in Credit File & Ratings
See now this document --> Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies
Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies

Foreword by the Information Commissioner’s Office

The Information Commissioner’s Office (ICO) published Data Protection Technical Guidance: Filing defaults with credit reference agencies in 2007. This guidance now needs updating to take into account developments in the methods used to file arrears, arrangements and defaults. However, rather than updating our own guidance, we thought it best for this ‘principles’ document to become the main source of advice for the public on the reporting of arrears, arrangements and defaults with the credit reference agencies (CRAs).

The principles in this document have been drawn up by the credit industry in collaboration with the ICO. The ICO will continue to work with the industry to ensure that these principles remain up to date and that the privacy rights of individuals are respected.

ICO will retain a keen interest in how personal data is processed within the credit industry, given the significance for individuals of decisions based on CRA information. A record lodged with a CRA must be a reliable reflection of an individual’s credit standing. The Data Protection Act 1998 is likely to have been breached where, for example, inaccurate, out of date or excessive personal data is being used to assess your credit-worthiness.

Where there is a problem with the content of a CRA record, you should contact the organisation concerned to give it an opportunity to put things right. If that fails, you can contact the ICO helpline on 0303 123 1113. Please note though that we can only deal with issues to do with the accuracy etc. of your record, not with lending decisions based on it.




Introduction

Credit Reference Agencies (CRAs) hold databases of debts and payments on products offered to consumers and businesses that relate to financial commitments. These will include credit agreements such as mortgages, loans, credit cards or current accounts, and commitments such as telephone agreements, energy and water utilities.

Information about the limits, balances and how these agreements are managed, are shared by the provider with CRAs. They in turn can provide a copy of your credit reference file to other organisations to be used by them to help make decisions about you or your business (if you have one). Your credit reference file may only be used for agreed and specific purposes.

You can see a copy of your credit file on request and on payment of a minimal fee. There is specific legislation which sets out what must be supplied and how quickly the file must be sent to you.

The operation of CRAs in the UK is licensed by the Office of Fair Trading under the Consumer Credit Act, but the day to day activities are governed by several laws that cover aspects of credit referencing such as:
  • The Data Protection Act 1998
  • The Representation of the People Act
  • The Consumer Credit Act
  • The Companies Act

However, the main legislation is the Data Protection Act 1998 and the Regulator is the Information Commissioner’s Office (ICO).

How CRAs operate is agreed with the ICO and the purpose of this document is to set out the principles under which information about arrears, arrangements and defaults are filed with the CRAs.

These principles will be of interest to regulators, lenders and consumers and their representatives.

The principles set out in this document have been reached after extensive consultation with the ICO, lenders, CRAs and trade associations. Adherence to these Principles will be periodically reviewed in line with the credit industry’s data sharing governance procedures.

You, as a customer, will be told in the terms and conditions of your credit product how your information may be used by your credit provider, CRAs and others.



The Principles


1.Data that is reported on your credit file must be fair, accurate, consistent, complete and up to date.

Lenders that supply data to the CRAs are required to ensure that the data is accurate, up to date and meets agreed quality standards.

The types of product that are reported all relate to forms of credit, but the features of one product type may be very different to another. Rules are in place to ensure that arrears information from different providers, but on the same product type, has the same or a similar meaning.

Rules are also in place to require that the reporting of information on different products is provided in such a way as to mean the same, irrespective of type.

For each product type there are required levels of data (mandatory fields) that must be supplied in order for the data to be loaded and/or updated.

Whilst most credit products are repaid monthly, some are not, such as home credit1. In these cases, the information will be adapted to meet the monthly reporting standards of the credit reference industry.

Should your account be sold or referred to another lending organisation or a debt collection agency, the record(s) provided to a CRA by the creditor/and or purchaser must still be accurate and up to date. In all instances you should be told whether and how the information will be reported on your credit file.



2.Should a payment not be made as expected, information to reflect this will be recorded on your credit file

If you do not make your regular expected payment by the agreed time and/or for the agreed amount according to your terms and conditions, the account may be reported to the CRAs as being in arrears.

If this continues over time, the level of reported arrears will increase, which may result in the lender taking some form of action. This could include notification of their intention to report the account as “defaulted” (see Principle 4 below).


1 Home collected credit includes informal flexibility as standard to help debtors cope with unexpected budget pressures. In effect, the home credit agent can - during the weekly home visit - agree missed or part payments on the spot (normally at no extra cost). These informal variations are not themselves reported. However, when the debtor has - in aggregate - missed to the value of 4.33 weekly repayments (equivalent to one month’s arrears), that is reported (as arrears). Only the larger home credit companies use the reporting agencies.


Calculating and reporting arrears

In general, the reporting of arrears is designed to indicate that the expected payment, whether a fixed sum (as in the case of many products) or required minimum (in the case of credit and store cards), has not been paid according to the terms and by the due date.

The purpose of reporting arrears is to indicate at the earliest reasonable opportunity that a customer is showing signs of potential financial difficulty.

Arrears are reported as missed payments through status codes such as 1, 2 etc which are based on the number of months missed.

Generally by the time the account is 3 months in arrears, the lender may be taking further action such as reporting the account as defaulted (see Principle 4 below). Missed payments may continue to rise and be reported up to a maximum of 6. On some products this may continue to show as 6 until the lender takes action and reports the account as being in default.

Current balance

This information relates to the amount owed at a given point in time.

It may be made up of a combination of the amount borrowed, interest and charges depending on the terms of the product.

Due to the nature of some revolving products, the current balance (owed) may show as zero even though the account is still active e.g. mobile phones, credit cards and mail order.

Reporting of arrears over time

Arrears should generally only increase by one month at a time e.g. status code 1 to 2, 2 to 3 etc. There can be exceptions to this such as fraud, bankruptcy, county court judgments (CCJs), returned cheques or direct debits.

In the event that repayments are made and the arrears reduce, the change in arrears status should be recorded in the next monthly update.

In contrast to the reporting of increasing arrears, reducing arrears may legitimately “jump” status codes if significant payments are made and/or capitalisation occurs (see Principle 3 below).



3.If you offer or make a reduced payment, how it is reported will depend on whether it is agreed with the lender.

Agreed reduced or revised payments

If, due to financial difficulty, your lender agrees a reduced or revised payment with you, this will be reflected on your credit file. How revised or reduced payments are shown on your credit file will depend on whether it is a temporary or permanent change to the agreement. The account may or may not be in arrears at the time of the change.

Should a permanent change in the payment terms be agreed by the lender, there will normally be a new agreement signed and the revised terms will be reported going forward.

This may mean that a new limit, account and/or term is shown on your credit file and performance will be reported against that going forward.

As long as you comply with the revised terms, arrears will not accrue further or be shown although any arrears reported under the previous terms will stay on your credit file.

Should a temporary reduction in the payment amount be jointly agreed between you and your lender, this ‘arrangement’ will be recorded at the CRAs.

This may also occur if there is a temporary change in terms (that is not part of the product) such as a payment holiday or change to interest only.

Depending on the period and amount of the arrangement, arrears may continue to be reported. Such temporary arrangements may last for some time but are generally expected to revert to the contracted terms at some future point. For such accounts arrears may continue to be calculated in accordance with the contracted terms.

The record must show that the account is the subject of special terms. The reporting of this fact may be different depending on the product and the CRA.

It is important that you are made aware when such arrangements are made and maintained, that it will show on your credit file and that whilst arrears may accrue and increase, a default will not be recorded.

Following a satisfactory period of payments under a temporary arrangement, and if the lender agrees, the status on your account may be set to zero; although the history will remain. This can be described as capitalisation, re-scheduling or re-aging. Depending on the product this could result in adjustments to how your account is reported on your credit file e.g. the payment amount, repayment period as well as the status. Should you make full payments from this point onwards your account will be classified as being up to date.

If after a period of time a permanent change in terms on an account occurs then if appropriate, the revised terms should be recorded at the CRAs and payment performance calculated against the new terms; in such circumstances there will no longer be an arrangement in place.

If your lender agrees to give you a temporary arrangement, but you fail to make the agreed payment against the new terms, they may still file a default (see Principle 4 below) as soon as a payment is missed, as long you were at least 3 months in arrears on the original agreement.

If you are subject to a debt management programme managed by a third party (such as StepChange) this will be shown on your credit file so that lenders know you are subject to this type of arrangement.

Debt Management Programme

A debt management programme (DMP) is when a third party debt adviser negotiates a repayment schedule for all or a number of a consumer’s credit agreements.

If the plan is accepted by the lender, the record filed at the credit reference agencies must reflect that the consumer is on a DMP. For such accounts arrears may continue to be calculated in accordance with the contracted terms, but the account marked as under a DMP.

Unacceptable or Token payments

If your lender does not agree a reduced or revised payment with you because the amount you offer to the lender is not acceptable, for example, a very low or token payment, the account will not be reported as an arrangement.

Any payments you make will be reflected in the current balance, arrears will continue to accrue and a default may be recorded.



4. If you fall into arrears on your account, or you do not keep to the revised terms of an arrangement, a default may be recorded to show that the relationship has broken down.

As a general guide, this may occur when you are 3 months in arrears, and normally by the time you are 6 months in arrears.

There are exceptions to this which may result in a default being recorded at a later stage, such as secured or long term loans e.g. mortgages, or if the product operates in a more flexible way e.g. current accounts, student loans, home credit.

If an arrangement is agreed (see Principle 3 above), a default would not normally be registered unless the terms of that arrangement are broken.

Apart from being 3 or more months in arrears there are other circumstances which may lead to the recording of a default:

1.Property such as a house or vehicle has been repossessed or handed back with no indication to pay a remaining balance.
2.The provider takes steps to cut off a service.
3.The account is in arrears and the provider receives an indication that you have left your address without notifying them.
4.Evidence of fraud.
5.The account is or has been included in a bankruptcy, CCJ, Individual Voluntary Arrangement (IVA) or similar.

The lender must have notified you of their intention to register a default against you at least 28 days before doing so, in order to give you time to make an acceptable payment or reach an agreement with them on an arrangement. This also applies in cases 1 - 3 above.

However, in 4 - 5 the lender or provider does not need to provide a notice and can file a default as soon as they become aware of the situation.

Lenders will report the default amount and the default date to the CRAs.

The current balance then shows the actual amount due (which may include interest and charges) and must be updated over time until the account is satisfied (settled).

A default will remain on your credit file for 6 years from the default date.

A default should not be filed:
  • If you make a payment, in time, that fully meets the terms set out in the default notice
  • If jointly with the lender an agreement is reached for an arrangement and you keep to the terms of that arrangement
  • If the amount outstanding is solely made up of fees or charges
  • If a lender is given evidence that a customer is deceased (for example a verifiable death certificate, probate or letter of administration)

The date of default recorded on the file would normally be the date on which a decision to file a default becomes effective, e.g. 28 days from the date of the default notice.

The default amount filed should normally be the balance amount as quoted on the default notice. However, if any payments or charges apply in the interim period, the default balance reported may reflect the outstanding balance at that time.

The current balance should be updated regularly and reflect any charges added and/or subsequent payments received whether direct to the lender or via a third party organisation (debt collection agency) or, for example, as a result of the sale of a repossessed asset.

Relationship of defaults to CCJs, decrees, bankruptcies, IVAs and similar arrangements

A default can be registered for debts which the lender has also tried to recover through a CCJ or decree.

In normal circumstances lenders will be notified when the debt that is owed to them is to be included in an insolvency e.g. bankruptcy, IVA or similar and should be marked as included in that by filing a default as soon as is practical.

The default date must be consistent with that of the CCJ/bankruptcy or IVA; therefore a default should be filed as being no later than the date of the insolvency order. In circumstances where the lender is not immediately aware, the default can be filed at that point in time. If evidence of the insolvency date is provided, the default date recorded at the CRA will be aligned.

If a default has already been filed and a CCJ or other insolvency or similar is subsequently registered, no further action is needed.

Where there is joint liability and only one party is the subject of an insolvency order, then the account should not automatically be marked in default if it is being maintained by the other party.



5. When an account is closed, the record should properly reflect the closing payment status of the account and any agreement between the parties

If you make a full or part payment and no further money is expected, the account should be closed unless you have agreed with your provider to continue your relationship.

If the account is to be closed, your record should be marked as fully paid if:
  • You have paid the money owed in full
  • A CCJ or decree was granted and you have paid in full the money owed as determined by the court

Your record should be closed and marked as partially settled if:
  • The lender accepts final settlement of the account for less than the balance outstanding
  • Your account is included in an insolvency such as a bankruptcy or IVA which is discharged / completed and less than the full amount is paid

The fact that the account was previously in default will remain on your credit file for 6 years from the date of default. If the account was not in default, the record would remain on your credit file for 6 years from the date of closure.



APPENDIX

Any product which relates to the provision of goods or services before they are paid for can potentially be included in your credit reference file. The list below is not meant to be exhaustive but is designed to give an indication of the types of product that can be shared, including information about them for the benefit of those who might not be familiar with them.


Budget/Revolving


An account or facility for the purchase of goods up to an agreed credit accounts limit. Revolving accounts may involve numerous purchases and repayments, whereas a budget account is repaid by constant regular amounts. Interest is charged on the credit taken.

Credit and store cards

A card allowing credit up to an agreed limit and on which a monthly bill will be generated requiring payment by a set date. Repayments are made either in full, or as a proportion of the balance owed – a minimum amount will be set by the lender and advised on the monthly statement.

Credit cards may be used in any outlet that accepts the type of card but store cards can only be used in the issuing store.

Communications (Internet services, Cable, Satellite TV, Telephones, Mobile, Fixed line)

This will cover all communications services which are paid for under contract or subscription. Pay as you go type products will not be included.

Utilities (Gas, Electricity, Oil, Water)

Utility accounts that are paid monthly, quarterly or annually may be included on your credit reference file. Pre paid metered accounts are not generally included.

Factoring (business only)

A way of obtaining credit against payments expected on outstanding invoices.

Home collected credit (consumer only)

Small-sum, fixed-term credits. Repayable weekly. An agent will call on the customer each week in the home to collect repayments and, where required, issue further credit . Home collected credit includes informal flexibility as standard to help debtors cope with unexpected budget pressures. In effect, the home credit agent can - during the weekly home visit - agree misses or part payments on the spot (normally at no extra cost).

Lease and hire purchase

Lease agreements such as those for cars or machinery (business) where the item is subject to monthly payments over an agreed term. Generally the goods do not belong to the individual until all payments are made.

Loans

Personal and business loans are paid over a set period usually with a fixed payment amount. This can also cover loans for retail purposes and insurance premiums.

Mail order

Mail order credit is generally in respect of goods purchased through a catalogue or the internet. Repayments are made either in full each month or as a percentage of the balance owed.

Mortgages (Commercial, House purchase, Buy to let, Second mortgages)

A loan, secured against property (which can be residential, buy-to-let or commercial) commonly used to purchase the property, but can also be used for a variety of other purposes including home improvements, or to raise finance for either personal or business use.

Pay day loans (consumer only)

A small, short-term loan that is expected to be repaid on the borrower’s next pay day.

Retail credit

These are deferred payment accounts e.g. buy now pay later. These are generally paid over 12 or 24 months.

Student Loans(consumer only)

Loans to pay for further education.
I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to [email protected]

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IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed

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  • fermifermi Forumite
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    Updated for latest guidance
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to [email protected]

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • edited 23 October 2014 at 11:58AM
    fermifermi Forumite
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    edited 23 October 2014 at 11:58AM
    Old Technical Guidance can be found archived here:

    http://webarchive.nationalarchives.gov.uk/20100428141142/http://ico.gov.uk/upload/documents/library/data_protection/detailed_specialist_guides/default_tgn_version_v3%20%20doc.pdf

    or here:

    http://www.experian.co.uk/www/pages/downloads/compliance/guidance_on_defaults.pdf

    Creditors and companies should have followed those up until 01/01/2014.

    Principles/situations not covered in the new guidelines are also arguably still covered by those as well.
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to [email protected]

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • fermifermi Forumite
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    10,000 Posts Combo Breaker Intrepid Forum Explorer Rampant Recycler
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    Note: New guidelines are not retrospective.
    I'm a Board Guide on the Debt-Free Wannabe, Bankruptcy, Credit Cards and Loans boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Board guides are not moderators. If you spot an inappropriate or illegal post then please report it to [email protected]

    Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB

    IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed
  • edited 4 February 2016 at 12:06PM
    fermifermi Forumite
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    edited 4 February 2016 at 12:06PM
    From the ICO guidance to case officers.

    CRAs - Lines to take

    From: https://www.dropbox.com/s/ivviixi14ryq3zt/ICO%20-%20CRA%20Lines%20To%20Take.pdf?dl=0
    CRA Arrangements to pay - fairness of them registering a default

    As stated in the old default guidance, where an arrangement to pay breaks down, a default may be filed when the total value of the arrears is equivalent to three monthly payments under the original terms. However, this should not result in the customer being placed in a worse position than someone who had made no effort to pay whatsoever.

    Whether an individual has been left in a worse position or not is something that we will have to consider on a case by case basis. However where we feel that the arrangement to pay has left the individual in a worse position than someone who simply stopped paying, we would normally consider this to be unfair under the first principle and ask the lender to amend the default so that it was the same as if the individual had simply stopped making payments without entering the arrangement to pay.


    CRA Can I stop them from processing my personal data?


    If the records are accurate, there is no right of deletion under the Data Protection Act and therefore, the ICO could not compel the credit reference agencies to delete any individual's personal data. Section 14 of the Data Protection Act 1998 gives individuals the right to ask for the records to be amended or deleted only if they are inaccurate and they would need to do this through the courts rather than the ICO.

    Section 10 of the Data Protection Act provides a more limited right for individuals to request an organisation to cease processing their personal data if it is causing or is likely to cause them substantial damage or substantial distress that is unwarranted. However, it appears unlikely that an individual would be able to show that the processing of accurate data by a credit reference agency was causing them substantial unwarranted damage or distress.


    CRA Default on a credit file Vs default under the CCA


    I was not sent any default notices, should the default on my credit reference file be removed?

    In most cases, the answer will be ‘no’, provided that adequate fair processing information was provided when the account was originally opened.

    It may help to explain that a “default” on an individual’s credit file does not mean that an individual has been defaulted under the Consumer Credit Act; essentially, the same word is being used to describe two slightly different things (which can obviously lead to some confusion). Instead, a “default” on a credit file simply means the lender considers the relationship between itself and the individual to have broken down.

    Therefore, whilst it may be a requirement of the Consumer Credit Act to issue default notices, there is no DPA obligation on a lender to issue a default notice to individuals before marking an account as being in default on their credit file. Although we advise that it is good practice to issue a notice, lenders will often have provided individuals with fair processing information about defaults and notices in the terms and conditions when the account was opened. Provided this was the case, then it is likely to satisfy the “fairness” aspects of the first principle.


    CRA Defaults - Guidance for filing defaults


    Updated guidance for filing defaults with credit reference agencies was published on 1 January 2014.

    The official site can be accessed at http://www.scoronline.co.uk/key_documents/ and the relevant document is entitled Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies.

    This is not the ICO’s guidance but a new document drawn up by the credit industry in consultation with the ICO which is now intended to be the main source of information for the public on this topic.

    This may create some impact on calls to the Helpline or complaints received where an individual is concerned that a default has been registered incorrectly on their credit reference file.

    Although the new guidance does not cover this in any depth, it is important to make individuals aware that there is a difference between a ‘default notice’ and a ‘default’ registered on a credit reference file.

    A ‘default notice’ is a communication a lender should usually send to a borrower before defaulting a credit agreement regulated by the Consumer Credit Act (CCA). There is not necessarily any DPA obligation on a lender to issue a default notice to individuals.

    Although we advise that it is good practice to issue a notice, lenders often provide individuals with fair processing information about defaults and notices in the terms and conditions when the account is opened. If this is the case then this is likely to satisfy the “fair” aspect of the First Principle.

    The term ‘default’ on credit reference files is used to refer to the situation when the relationship between lender and borrower has broken down, and this scenario is explored in more detail in the updated guidance on defaults.

    So essentially, the absence of a formal ‘default notice’ would not prevent a default from being registered on an individual’s credit reference file. If there are outstanding payments or arrears in respect of a loan or other account then an organisation would be within its rights to record this at the credit reference agencies. Providing the information recorded is an accurate reflection of events then the Fourth Principle would not be contravened. Legislation DPA


    CRA Defaults - Necessity of recording of defaults with multiple CRAs.


    Body There is no requirement in the DPA for lenders to report details to all of the Credit Reference Agencies(CRA). There isn’t a requirement in the DPA for them to report any information to the CRA’s.

    However, it won’t be a breach of the DPA for lenders to report the information to the CRA’s as it will be in their legitimate interests and the legitimate interests of other lenders to help them make responsible lending decisions.

    It is up to the lender to decide which CRA or CRA’s they use (if they decide to use one).


    CRA Defaults - Recording of defaults relating to debts that have been sold.


    The practice of selling/buying debts is widely used. As long as the information is correctly recorded on a credit file by the lender selling the debt and the lender buying the debt, then two entries relating to one account would not be considered to be a breach of the Data Protection Act provided that:-

    • both recorded entries are shown as being in relation to the same account/debt;
    • the original debt entry should be shown on the credit file as being either ‘settled' or ‘zero' balance and should show that the debt has been ‘re-assigned’;
    • the new DC who shows the debt in their name should maintain the original default date and the correct balances;
    • the retention period for maintaining the information on a credit file should be based on the original default date regardless of who is responsible for the entry/debt.



    CRA Defaults - Showing defaults relating to unenforceable debts.


    The ICO has considered the circumstances in which the credit reference agencies should be permitted to record details of unenforceable credit agreements. In doing so we have had particular regard not only to the clear legislative intent that the absence of a signature on a credit agreement should no longer be an absolute bar to enforcement, but also to the following factors;

    1.The question of whether a legal liability exists in relation to a credit agreement is quite separate from the question of whether such a liability may be enforced by the creditor.

    2.Where a liability does exist, creditors have a legitimate interest in sharing relevant information about that liability, including information about whether the amount due has been repaid. Such information may properly inform responsible lending decisions, regardless of whether the liability is enforceable.

    3.Responsible lending decisions are dependent upon lenders receiving accurate information about individuals' ability (and/or inclination) to repay their debts.

    Where a credit agreement clearly existed and credit has been provided to the debtor, but the debtor is not obliged to repay the loan clue to the provisions of the Consumer Credit Acts, this does not mean that there was no agreement in the first place. It simply means that there was no enforceable regulated agreement.

    It follows that, where the existence of the agreement is not in doubt, we consider it to be appropriate for information about the agreement, including any failure by the debtor to repay his or her debt, to be recorded with the credit reference agencies. Where a ‘debtor' disputes the existence of any credit agreement, enforceable or otherwise, we would ask to see evidence of the agreement and of its terms. This might include evidence of the provision of the credit facility or of a history of payments made by the debtor.


    CRA Do they require consent to process personal data?


    No. One of the conditions for processing in Schedule 2 is that the individual has given their consent to the processing. However another is that it is in the legitimate interests of a data controller. No one condition carries greater weight than any other. All the conditions provide an equally valid basis for processing.

    Examples.

    A company employs a debt collection agency to pursue a debt on their behalf.

    If the company (the data controller) uses a debt collection agency (the data processor) to pursue the debt on their behalf, then they wouldn’t require the consent of the individual to do this.

    This is because the debt collection agency is acting on their behalf. This is the same as any other data controller data processor relationship where there should be a contact in place between them which explains what the data processor is allowed to do with the personal data. The data controller still has to ensure that the DPA is compiled with.

    A company sells the debt onto a debt collection agency.

    This is because the company that sold the debt on has a legitimate interest to reclaim any monies owed to them. In the majority of cases companies will also explain in their terms and conditions that this is a possibility if an individual isn’t able to make repayments. The company that debt has been sold onto will also then have a legitimate purpose to pursue the debt with the individual for monies that are outstanding.


    CRA How accounts included in a bankruptcy should be recorded


    Default date MUST be NO LATER than the date of the Bankruptcy.

    Settlement date (where shown) MUST be NO LATER than the date of Discharge.


    CRA How payments on a debt management plan should be recorded


    Payments on a debt management plan can be recorded in several ways, including, marking the debt with ‘debt management program in force’ or DF - account in default, or recording this fact in a notice of correction.

    All of the above can be correct, depending on the situation. Essentially, it depends on whether the lender is satisfied with the reduced payment that it is being offered.

    The following is based on the information in the old defaults guidance:

    Moderate to high levels of repayment — if the payment set out in the debt management plan (DMP) is at a level that a lender considers at least adequate, the agreement should be marked as included in a DMP. A lender may be willing to reschedule the agreement at a later stage (i.e. end the old agreement and start a new one under the new terms) at which point the record should be changed to reflect the agreed rescheduling.

    Low repayment levels — If the payment set out in the DMP is at a level that represents only a token sum in repayment because it is all the customer can afford, the account should be recorded as a default. A notice of correction can be added to the credit file by the customer, or the third party debt adviser acting on their behalf, to record the existence of the DMP. This will distinguish the customer from those who have acted less responsibly. The lender should bring the notice of correction facility to the attention of the customer and their debt advisers.

    In summary, marking the account as “debt management program in force” or similar means the lender is satisfied that the reduced repayment offered is adequate.

    Marking the account as defaulted means the lender does not consider the reduced repayment that has been offered to be acceptable.

    It should be noted that accepting a token payment does not mean the lender is considered to have accepted the amount as satisfactory. The lender can take such token payments (as the only realistic means of reclaiming any of the money it is owed) and still file a default. However, the lender should take particular care to ensure that the individual and/or debt adviser is made aware that this will happen and is not led to believe that the reduced payment constitutes a satisfactory reduced payment if this is not the case.

    Ultimately, from a data protection perspective, it is up to the lender to decide whether an offer of reduced payment is satisfactory or not. Organisations like the FCA or the F08 may be able to look into whether the lender has generally treated the customer fairly, but this isn’t something we could get involved in.

    It is worth noting that we are currently discussing this particular issue with the industry. This particular line may therefore need updating in the future. In the meantime, it would be useful if First Contact can make Strategic Liaison aware of any complaints about this so that we have some examples to discuss with stakeholders.


    CRA None credit organisations passing information to a CRA?


    The telecoms and utilities sectors are not subject to the CCA. The following sets out the ICO’s view on utilities companies sharing information with the credit reference agencies.

    Credit agreements are included on the credit file as well as other agreements such as telephone agreements, energy and water payments. The ICO has accepted that agreements such as utilities bills can be recorded on the credit file as in most cases the services are provided before they are paid for. There are exceptions, such as pre-payment meters, that should be handled differently.

    The water companies use the legitimate interests condition to share data with CRAs. However, they must be clear and transparent with consumers about what they are doing with the data and the data must be accurate.

    Sharing utilities data is a topic that consumer groups have focused on and they recognise that sharing utilities data should not cause unnecessary damage or distress to consumers. Clearly, accuracy problems resulting in the incorrect placing of a default on a credit reference file must be avoided. The Consumer Focus (now known as Consumer Futures) document below may be useful. It highlights the consumer benefits of utilities data sharing.

    http://www.consumerfocus.org.uk/files/2011/10/Consumer-Focus-On-the-record.pdf

    To conclude, as an office we have accepted that utility companies can pass personal data relating to outstanding payments to CRA’s as explained above. However, even though we accept that this type of activity is allowedunder the DPA, we are of course still concerned with other DPA related issues such as fairness (eg the adequacy of fair processing given to data subjects about potential disclosure to the CRAs), accuracy and the length of time the personal data are held. Therefore, if individuals believe that there are accuracy, retention or first principle concerns, they may still request an assessment of their case under Section 42 of the DPA.


    Rental Exchange


    This scheme involves local councils or Housing Associations providing information to CRAs. It is a project that is designed to help individuals improve credit ratings by having their rental payments included in the credit file.

    We have stated that just because Experian has informed us of the development of the project does not mean we endorse it in any way.

    Councils or Housing Associations need to make their own decision about entering into the project. It will be their responsibility to ensure that any project is correctly implemented fully addressing all the possible issues.

    We contributed the below to an Experian leaflet that sets out our position.

    “The ICO was approached about Rental Exchange in October 2010 and has had the opportunity to comment on data protection and privacy issues throughout the development of the project.

    It is anticipated that many of the housing associations considering using Rental Exchange will have similar queries relating to the Data Protection Act 1998 (DPA).

    For this reason, the ICC has addressed some of the common issues here. This is not an ICO endorsement of the Rental Exchange Project, it is a reflection of the advice that the ICO has provided to Rental Exchange and Experian since October 2010.

    Much of the discussion has focussed on the justification for sharing tenant’s rental payment information. Above all else, data sharing must be fair, as well as satisfying the relevant conditions for processing. One such condition is consent, but gaining consent from data subjects is one of several other equality valid conditions for processing available under the DPA. The ICO is aware that the legitimate interest condition is being used in the context of Rental Exchange and the justification for this is explained by Experian above.

    Despite the use of the legitimate interest condition, the ICO is pleased to note that if a data subject does not want their data to be shared through Rental Exchange (having weighed up the benefits), their objection will be respected. This enhances the data subject's control over the use of their data and the general fairness of the project.

    The ICO is satisfied that discussions over the project reflect Big Issue Invest and Experian’s understanding that a critical part of fulfilling the requirements of the legitimate interests condition is to be absolutely transparent with tenants about how their data will be used. The Fair Processing Notice has been developed by Experian and Big Issue Invest and the ICO’s comments have been taken into account and incorporated into the final draft. Any housing association that previously informed existing tenants that their data will not be shared with CRAs or similar third parties should consider this when moving to Rental Exchange. This point was raised during discussions but it was considered unlikely to be relevant in most cases. Nonetheless, it should be considered by housing associations that are considering
    processing existing tenant’s data in new ways.

    In addition to discussions about Rental Exchange, Experian has provided the ICC with updates on the project at regular liaison meetings. The ICC looks forward to continuing discussions as the project develops.”


    CRA Rapid updates and P4


    It is our understanding that all three main CRAs offer a rapid update facility.

    The facility is, as described on the Experian website, "..a manual overnight update intended only for correcting significant errors that might, for example, prevent someone getting a loan. It is like a triage system in A&E to make sure the most serious cases are dealt with quickly.”

    We do not interpret the ability to provide a rapid update in certain circumstances as a general obligation (under the “where necessary, kept up to date” provision) to provide one upon request, as long as the data controller has a reasonable updating procedure already inplace, which we understand the main CRAs have at present.

    Internal line only - However, there may be individual examples where a rapid update is warranted and any refusal to do so when asked may be a breach of the fourth principle.
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