Petition to Reform the current system of payment markes on consumer credit reports

neilperks

Deleted_User said:

neilperks said:

Deleted_User said:

neilperks said:

Deleted_User said:

neilperks said:

Deleted_User said:

Lenders can already see if any account is being paid off and if the default has been settled, so no need for an additional marker.

I would have to disagree with you in part ... while Lenders may be able to see the payment information, the default marker remans applied despite positive actions being taken, which continues to negatively impact credit eligibilty. The 'remedied' marker would bolster incentive to settle defaulted accounts on the premise that the new marker imposes a lesser impact on their credit score, giving the consumer a fair(er) chance to improve their economic condition by improving their eligibility for credit.

It would make no difference to now a lenders assesses an applicant, as the default, payment history and any settlement is still all there. The default won't be hidden or given any more or less emphasis because of an additional marker.

If a CRA decided to change your credit score because of a new marker, that would again  make no difference, as the score has no relevance to your credit worthiness.

The only way  you would change how you were assessed would be to change the underlying data, but that won't happen as it needs to be accurate.

I understand that accounts can already be marked as 'settled / part settled' however the default marker still carries the same weight as if the account was left unresolved... this certainly does bare relevance to a person's credit worthiness.

That's not true though.

Any default is still an indicator of high risk, but I don't know of any lender who doesn't distinguish between settled and unsettled defaults.

The whole point of risk assessment is get as granular as you can so you can price appropriately for each segment.

Even if it were true, adding a new marker wouldn't change a lender's mind if they believed that there was no difference between settled and unsettled.

Then I guess it would have to come down to legistlation for lenders to adopt the new marker when assessing risk and making decisions, hence the petition.

There won't ever be legislation for lenders to ignore risk factors in their decision making. It's a commercial process. And remember that the marker is not giving any information. It would be like saying a lender has to look at your credit score. 

From a lending point of view, all the data I need is currently there, along with the other information collected in the application process..  Debts, repayment history, breaches and settlement.

I'm not sure how this has led to suggest that legistlation should allow lenders to ignore risk factors ... sorry if this has become confusing to any readers.

Again, I appreciate your opinion in support of the current system and thank you for sharing your thoughts with me

neilperks

molerat said:

The reporting system seems basically OK, a default is a default for whatever reason and past history is not changed by a current event.  What needs looking at is ensuring that the markers are applied fairly and that there is an easily accessible  dispute mechanism without being bounced between the two parties each blaming the other.

It has been seen many times on here that some are willing to settle a debt if the marker is removed. They only want to do this when they are trying to take more credit, usually a mortgage, and were quite happy leaving the debt outstanding as it suited them. Should they benefit from a different marker because they settled the debt purely in their own interest ?

Hey thanks for your comments ...you bring some refreshing points to the table.

In terms of the basic system, I agree that the markers should be applied fairly. With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Despite these differing scenarios, the default is recorded on their file regardless,

You mention some are only seemingly willing to settle a debt if the marker is removed, althought that course of action would not realistically be a fair representation of the accounts history, but of course you do raise a valid point.

The synopsis of my petition proposes a mediatory marker to indicate where a debtor has proatively remedied a default account within an agreed timeframe with the Lender / Third-party. As such, the debtor would not reap the benefit of a fully satisfied account but would be awarded more worthiness for (albeit eventually) managing their financial obligations.

I hope that makes more sense

Thrugelmir

neilperks said:

molerat said:

The reporting system seems basically OK, a default is a default for whatever reason and past history is not changed by a current event.  What needs looking at is ensuring that the markers are applied fairly and that there is an easily accessible  dispute mechanism without being bounced between the two parties each blaming the other.

It has been seen many times on here that some are willing to settle a debt if the marker is removed. They only want to do this when they are trying to take more credit, usually a mortgage, and were quite happy leaving the debt outstanding as it suited them. Should they benefit from a different marker because they settled the debt purely in their own interest ?

 With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Too many variables. People being people they'll play the system to their own advantage. Users of credit information set their own rules. 

eskbanker

neilperks said:

In terms of the basic system, I agree that the markers should be applied fairly. With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Despite these differing scenarios, the default is recorded on their file regardless,

But that's the way it should be - if an account was defaulted then anything subsequent to that can't change that basic historical fact of what unequivocally did happen.

The subsequent conduct, i.e. whether or not full or partial repayments are eventually made, is already reflected in the existing CRA data structures, so doesn't need new markers to represent the facts about what's happened.  In terms of the separate issue of how that data is interpreted, as mentioned in previous posts it's ultimately up to new creditors to decide how they use that data, but it's generally accepted that settlement does reflect better on the defaulter, i.e. better late than never.

neilperks

Thrugelmir said:

neilperks said:

molerat said:

The reporting system seems basically OK, a default is a default for whatever reason and past history is not changed by a current event.  What needs looking at is ensuring that the markers are applied fairly and that there is an easily accessible  dispute mechanism without being bounced between the two parties each blaming the other.

It has been seen many times on here that some are willing to settle a debt if the marker is removed. They only want to do this when they are trying to take more credit, usually a mortgage, and were quite happy leaving the debt outstanding as it suited them. Should they benefit from a different marker because they settled the debt purely in their own interest ?

 With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Too many variables. People being people they'll play the system to their own advantage. Users of credit information set their own rules. 

Thank you ... could you elaborate more on this for me please?

neilperks

eskbanker said:

neilperks said:

In terms of the basic system, I agree that the markers should be applied fairly. With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Despite these differing scenarios, the default is recorded on their file regardless,

But that's the way it should be - if an account was defaulted then anything subsequent to that can't change that basic historical fact of what unequivocally did happen.

The subsequent conduct, i.e. whether or not full or partial repayments are eventually made, is already reflected in the existing CRA data structures, so doesn't need new markers to represent the facts about what's happened.  In terms of the separate issue of how that data is interpreted, as mentioned in previous posts it's ultimately up to new creditors to decide how they use that data, but it's generally accepted that settlement does reflect better on the defaulter, i.e. better late than never.

Thanks for your input ... I appreciate your strong stance in support of the current system.

I also agree that, IF nothing was to happen further with a defaulted account then the 'default' marker would ultimately stand firm.

Just to reiterate again, the new marker would signify if /when a defaulted account was under mediation or had reached settlement under a repayment agreement with the lender and subsequently be marked as 'remedied', superseeding the prior defualt marker.

I believe the potential benefit of this additional marker would indicate to the lender that a consumer is of lower risk compared to a similar account maked as defaulted.

MovingForwards

To clarify this bit:

"With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account."

The marker on the account is shown as settled / satisfied or partly settled and then closed with a nil balance. Balances also reduce each month they're being paid. Lenders can see that.

A default draws a line under that credit problem and whether it's paid, or not, it drops off 6 years after being put on. 

The markers which cause lasting damage are AP / AR as they stay on for 6 years after the account has been settled and closed. It's really hard getting a company to put a default on after these have run for a while, even submitting the guidance, as it's not a requirement they have to follow.

Whatever marker is on the CRA reports, the damage does reduce overtime. There are some companies who won't ever lend while the markers show, but there's a lot more who will after they've been on for 3+ years.

eskbanker

neilperks said:

Just to reiterate again, the new marker would signify if /when a defaulted account was under mediation or had reached settlement under a repayment agreement with the lender and subsequently be marked as 'remedied', superseeding the prior defualt marker.

I believe the potential benefit of this additional marker would indicate to the lender that a consumer is of lower risk compared to a similar account maked as defaulted.

I must admit that I hadn't picked up on your distinction between delayed repayment with versus without (belated) agreement with the lender, which is effectively a fourth scenario on top of the three I was responding to, but 'remedied' would still be much the same as 'settled', i.e. it wouldn't supersede the default marker as such but would simply reflect post-default conduct. 

The fact remains that the repayment history will be visible on the credit file though, so prospective new lenders will still be able to see how quickly settlement was achieved, and to be honest are unlikely to be particularly interested in whether or not those timescales involved any consent from the creditor - the meaningful time to renegotiate repayment is before an account defaults....

Thrugelmir

neilperks said:

eskbanker said:

neilperks said:

In terms of the basic system, I agree that the markers should be applied fairly. With that said, there doesnt seem to be any clear distinction (by means of a marker) between a debtor who has repayed their account in reasonable time (albeit subsequent to a default), a debtor who has repaid a minimum amount for 6 years, and a debtor who has abandoned their account.

Despite these differing scenarios, the default is recorded on their file regardless,

But that's the way it should be - if an account was defaulted then anything subsequent to that can't change that basic historical fact of what unequivocally did happen.

The subsequent conduct, i.e. whether or not full or partial repayments are eventually made, is already reflected in the existing CRA data structures, so doesn't need new markers to represent the facts about what's happened.  In terms of the separate issue of how that data is interpreted, as mentioned in previous posts it's ultimately up to new creditors to decide how they use that data, but it's generally accepted that settlement does reflect better on the defaulter, i.e. better late than never.

I believe the potential benefit of this additional marker would indicate to the lender that a consumer is of lower risk compared to a similar account maked as defaulted.

Lenders would prefer to see a period of time where good account management is clearly demonstrated. 

mjm3346

"I believe the potential benefit of this additional marker would indicate to the lender that a consumer is of lower risk compared to a similar account maked as defaulted."

Cannot see why a lender would bother to spend anytime looking at this just to choose between poor risk or very poor risk -  unless they had trouble getting good risk clients and were aiming for the Wonga etc end of the market