Credit card partial settlements

National_Debtline

InsideInsurance wrote: »

I stand corrected on the first point then

On the second point, I dont see the relevance of Experian's view in this matter? They are a CRA and as such simply display the information that is given to them.

My issue with Natwest, and my point in general, was that if an agreement is explicitly such that it is full and final settlement then they cannot then tell the CRAs it is anything but a full and final settlement as then they have gone against the terms of the agreement and would be in breach of the Data Protection Act by having spread in accurate information.

Certainly in my case Natwest immediately backed down and paid compensation for their "error" in loading it on Experian as Partial and Final rather than F&F. I have informally helped a couple of friends/ family with similar issues and they similarly have found that banks back down and correct.

It does appear that there is some banks at least that have spotted this issue as there are plenty of examples on here of HSBC rejecting offers as full and final but saying they'll accept them as partial and final.

Each lender seems to have their own unique way of doing this. It can get incredibly confusing.

My own personal view is that the term 'full & final' should be used. The reason being is that it is long recognised as a legal principle. The use of the term 'partial' is quite a recent one - certainly one that has only really been going over the last five or so years.

Given that the term Full & Final Settlement is long recognised may be why it is possible to get a lender to agree to an arrangement as full & final if you really press them for it - like you have. Reading through the forums here on MSE and over at CAG, others have too. That said, I think the fact that some lenders use the term 'partial' is here to say and I admit that I'm not overly sure that, if any, legal ramifications there could be. What I can say is that we seldom see creditors offer a 'partial' settlement and then try and collect the rest. I don't understand why they cannot just use the term 'full & final', however. I Really hope that makes sesne.

The point about Experian was simply to show how the CRAs handle such matters. The debt should reflect a zeo balance once a settlement has been agreed.

That's really interesting about HSBC, thank you that.

Best wishes,

David.

InsideInsurance

National_Debtline wrote: »

I don't understand why they cannot just use the term 'full & final', however. I Really hope that makes sesne.

The point about Experian was simply to show how the CRAs handle such matters. The debt should reflect a zeo balance once a settlement has been agreed.

They cant call it a full settlement because in most cases it isnt a full settlement. The final part is what makes it such that they will no longer pursue on the remainder of the debt.

It is ultimately semantics but if you want to argue over what they then go on and tell the rest of the world about you via the CRAs then the semantics are important.

The CRAs are simply a data store and have very little control (or arguably knowledge) of what lenders are doing with the data downstream hence my confusion over why it was their opinion your sought.

As an illustration, one project I did several years ago was introducing credit score as a pricing factor for insurance. In simplistic terms, if your in a bad way financially the theory was you may be more prone to making fraudulent claims and so we want to charge you more to offset that risk.

After a lot of discussions, a lot of man hours both on our side and the CRA's, talking about all aspects of how this could be done from both a business sense and a technology one we got stuck on two points that our MD felt were very important. 1) Would future lenders see the footprint from the search and 2) would it impact the applicant's creditworthiness. In short they couldnt, even after it went up to ExCo level and we threatened to can the project, say for certain it wouldnt impact creditworthiness. They obvious said it shouldnt, why would a lender be worried about someone getting a quote for insurance? but ultimately they had no control over that

The same will go for Partial settlements, its in the data, its for the lenders to make their decision. When they go away on their corporate events and brainstorm new idea/ product features etc I would imagine it may come up in discussion of the value of data elements or not but that only really gives 2nd hand insight into useage.

If the lender says its in full to you, they should say it was in full to everyone. If you arent paying in full you shouldnt expect them to say it is in full but its obviously great if you can get them to.

National_Debtline

Hi again,

Thank you for taking the time to reply, your post was really interesting. The term Full & Final Settlement in this context has been around for hundreds of years, which is why I find it strange that there has been this shift in recent times. We asked Experian how they would record such information on the credit files they create for the public - this is so that we can tell our callers what to expect should they decide to check their individual files. We have a little info on what someone whould expect to see on our fact sheet.

If the lender says its in full to you, they should say it was in full to everyone. If you arent paying in full you shouldnt expect them to say it is in full but its obviously great if you can get them to.

I agree with that completely.

Best wishes,

David.

DogandBone_2

National_Debtline wrote: »

It's very common.

We sought opinion on this very matter from Experian. This is what they came back with:

'The debt would be recorded as a partial settlement. A P flag would be added to the file to indicate a partial settlement.

The outstanding balance will be changed to zero to reflect that no money is due; but the P flag will show that it was not paid in full. We don't currently believe such flags are usually used in credit scoring, but they could well be included in a lender’s underwriting policy rules. This could mean that the appearance of a flag on a report would trigger a manual review of the application, where the additional information could then be considered by one of the lender’s underwriting experts.'

The assurances given by the various lenders appear to be pretty robust. I would always suggest keeping the correspondance in a safe place - just in case someone does try and take further action later on down the line. For what it's worth - I've never come across this happening to any of the callers I, or any of my colleagues, have helped over the years.

Best wishes,

David @ National Debtline.

Hi David @ National Debtline.

It is my understanding that when a firm writes off a remaining debt then it is a 3 step process as to whether the debt actually no longer exists (is fully extinguished) & is directly related to the firms accounting process & has nothing to do with the CRA processing. CRA processing is IRRELEVANT to whether a debt exists or not.

The firms internal accounts process is:

a, Write off (firm reports debt as having no value on financial and management reports)

b, CNC - Currently not collectible (classification after write off where firm has determined that collection efforts should at some point continue)

c, Close Out - (classification after write off where firm has determined that no further active or passive debt collection action will be taken.


Can we take it from the accounting status classifications above that if a firm verbally says it will write off the remainder of a debt following a customers lump sum settlement offer, that those spoken words alone DO NOT MEAN the debt will no longer exist as it could mean the firm intend to resume collection activity at some point in the future?:

i.e "Partial Settlement"

Also that for a Consumer/customer to be certain & advised clearly that a debt will be closed out/extinguished/settled then a formal & unequivocal written statement is required to be provided by the firm which states the customers payment will be accepted as settlement of the customers liability (debt) as per FCA CONC 7.14.14 (OFT DCG 3.3 h)?


Basically:

CNC = Partial settlement (Being regulated by the OFT DCG 3.3 i & FCA CONC 7.4.2)

Close out = settlement of liability (debt) (the OLD OFT full & final settlement) (Being regulated by the OFT DCG 3.3 h & FCA CONC 7.14.14)

Which is why the OFT & FCA quote the DCG & CONC regs as they do... to comply with contract law in being fair & reasonable & providing the customer with clear information which is not misleading in any way? (I,e full disclosure for consideration prior to performance)

pvt

As I see it the lender reporting to the CRA has a duty to be honest.


That works both ways. It should be honest and not misrepresent to others accessing the data that the subject didn't repay money when he did, but should also be honest and not misrepresent to other lenders that the subject paid off a debt in full when in fact they didn't.


Showing the debt as partially settled and no money outstanding seems a perfectly straightforward way of representing the situation honestly and fairly.

DogandBone_2

pvt wrote: »

As I see it the lender reporting to the CRA has a duty to be honest.


That works both ways. It should be honest and not misrepresent to others accessing the data that the subject didn't repay money when he did, but should also be honest and not misrepresent to other lenders that the subject paid off a debt in full when in fact they didn't.


Showing the debt as partially settled and no money outstanding seems a perfectly straightforward way of representing the situation honestly and fairly.

Not if the debt hasn't been fully extinguished it dosen't...as in that case the debt (customers liability) still exists & could be pursued lawfully at any time.... even though the firm has failed to make the customer aware of that fact... like i said, what is recorded to a CRA file is completely irrelevant to whether a debt still lawfully exists or not

DogandBone_2

If a lender reporting to the CRA has a duty to be honest then WHY do most consumers CRA files contain inaccurate information which can be almost impossible to get corrected??

Do you really think lenders actually give a toss what they report to the CRA files, as long as it suits their agenda?