Bank error leading to loan payment default - compensation

H109

Our bank has made an error taking a final loan payment from us and then failed to notify or chase us for a year (I didn’t check as the DD was in place, funds available and we received a statement). We’ve made the final payment now and had the interest wiped, but there’s still the issue of it impacting our credit score. We haven’t yet had a conversation about getting the default removed from our record or a note being added to it, but there has been talk of compensation as they’ve accepted they were at fault. What amount of compensation do you think is reasonable for this error? Financial Ombudsman’s website seems to imply £100-300 would be appropriate given the credit score impact. I’m not entirely sure what the impact will be in the future but it will be on record and we otherwise have always repaid anything in full and on time.

eskbanker

If the bank has accepted liability then they should remove the default and update the credit agencies accordingly, so that it won't be on record in the future as far as prospective lenders are concerned.

As routinely pointed out on here, your 'credit score' is just a made-up number invented by the credit agencies and lenders don't see it, but if the existence of an erroneous default on your files led directly to refusal of credit (or some other tangible impact) then this should be factored into any compensation discussions.

Hoenir

What financial loss have you suffered. Compensation is in lieu of something. As distinct from a gesture of goodwill. 

cymruchris

If the ombudsman implies £100-300 - then try somewhere in that range. You're unlikely to be getting thousands with the ability to retire early. If you can prove quantifiable losses - actual real losses - then yes you could claim for those - but if a magic number goes up or down (your credit 'score') then you've not lost anything. As a gesture of goodwill - I'd go with a couple of hundred pounds tops - but see what they offer.

H109

I got the impression from the Ombudsman’s website that compensation doesn’t just relate to financial loss. It’s the stress of knowing there’s now an issue that we haven’t caused, and concern over the impact of being refused credit in the future or having decisions delayed. We can’t predict that currently - thus the query. It sounds like they are going to offer some form of compensation so I just wanted to be able to judge what’s appropriate. Re the first comment, thanks my first query will be if they can rectify the default record, then there’ll be no issue.

eskbanker

H109 said:

I got the impression from the Ombudsman’s website that compensation doesn’t just relate to financial loss. It’s the stress of knowing there’s now an issue that we haven’t caused, and concern over the impact of being refused credit in the future or having decisions delayed. We can’t predict that currently - thus the query. It sounds like they are going to offer some form of compensation so I just wanted to be able to judge what’s appropriate. Re the first comment, thanks my first query will be if they can rectify the default record, then there’ll be no issue.

You're right, FOS do suggest monetary awards for distress and inconvenience as well as actual financial losses, and describe them both as 'compensation', which is perhaps debatable, strictly speaking:

https://www.financial-ombudsman.org.uk/consumers/expect/compensation-for-distress-or-inconvenience

If the bank gets the credit files updated, then any impact should be restricted to the past rather than the future, so see what they're able and willing to do before engaging with them about compensation....

Brie

Compensation for time used to chase/resolve perhaps?  How much is that worth??  

CliveOfIndia

eskbanker said:

You're right, FOS do suggest monetary awards for distress and inconvenience as well as actual financial losses, and describe them both as 'compensation', which is perhaps debatable, strictly speaking:

If the bank gets the credit files updated, then any impact should be restricted to the past rather than the future....

You've absolutely hit the nail on the head.  To my mind, "compensation" should mean "recompense for actual and quantifiable financial loss", whereas in this case it might be better termed as a goodwill gesture.

OP, if the presence of an incorrectly-recorded default led to you being declined credit - or offered less favourable terms than you would have otherwise been offered - then you would have a valid claim for compensation.  Quantifying and proving those losses may, however, prove tricky.

But if this error has not directly impacted you in the past year, and if the erroneous marker is removed, then the upshot is that no harm has actually been done.  In that case I would suggest that the guidelines offered by the FOS would probably form a reasonable basis on which to negotiate a goodwill payment.

H109 said:

I’m not entirely sure what the impact will be in the future

So long as the incorrect marker is removed then it will have zero impact in the future.  Yes, it may very well impact the credit score you see on your CRA report - but to reiterate what has already been said, this is totally meaningless as far as any lender is concerned, so pay no heed to it.

eskbanker

Hoenir said:

What financial loss have you suffered. Compensation is in lieu of something. As distinct from a gesture of goodwill. 

CliveOfIndia said:

eskbanker said:

You're right, FOS do suggest monetary awards for distress and inconvenience as well as actual financial losses, and describe them both as 'compensation', which is perhaps debatable, strictly speaking:

You've absolutely hit the nail on the head.  To my mind, "compensation" should mean "recompense for actual and quantifiable financial loss", whereas in this case it might be better termed as a goodwill gesture.

I don't think there's any right or wrong answer as such, and much will depend on context, but perhaps worth noting that in another sphere altogether, namely the regulations on flight cancellations, there's a clear distinction between reimbursement of incurred costs and compensation paid (effectively for inconvenience) as a fixed tariff with no relationship to price paid or costs incurred - go figure!

CliveOfIndia

eskbanker said:

I don't think there's any right or wrong answer as such, and much will depend on context, but perhaps worth noting that in another sphere altogether, namely the regulations on flight cancellations, there's a clear distinction between reimbursement of incurred costs and compensation paid (effectively for inconvenience) as a fixed tariff with no relationship to price paid or costs incurred - go figure!

The voice of reason and logic, as ever, well put Sir (or Madam!) 

Your reason and logic fits perfectly with your profile picture !!