Data Protection Technical Guidance
Filing defaults with credit reference agencies
Introduction
Our general approach
The definition of a default
Indicators of a default
Time framework
Exceptions
Long-term secured loans
Current accounts
Flexibility
Variations in payment schedules - Keeping the record up to date
Rescheduling the agreement
Formal rescheduling of the agreement Informal rescheduling of the agreement
An ' arrangement to pay'
Debt management programmes
Unsatisfactory payments
Recording the amount of default
Original amount and current balance
When 'in collection'
The date of default
Notices of intention to file a default
Accuracy of default records
Records
Factors to be taken into account in enforcement
Unresolved disputes
Relationship of defaults to County Court Judgments (CCJs), decrees, bankruptcies, Individual Voluntary Arrangements (IVAs), and so on
The settlement or satisfaction of defaults
The 'sale' or assignment of debts on defaulted accounts
1 The aim of this guidance note is to set out our view to credit reference agencies and their clients on the data quality standards which should be met when filing information with credit reference agencies about defaults.
2 The Data Protection Act 1998, in the data protection principles, sets legally enforceable standards for organisations. The principles require, among other things, that:
- personal data is processed fairly and lawfully;
- personal data is adequate, relevant and not excessive in relation to the purpose or purposes of processing;
- personal data is accurate and, where necessary, kept up to date; and
- personal data processed for any reason is not kept for any longer than is necessary.
3 These principles are closely interrelated. It is difficult to see how a record which is inaccurate could be adequate for the purpose for which it is held. A record which has been kept for longer than is necessary may well be excessive and irrelevant for that purpose and a record which is not up to date is unlikely to be relevant to, or reflect adequately, the current position. The record of a default lodged with a credit reference agency provides a reliable reflection of the individual’s credit standing to other lenders1. If a record is unreliable or based on non-standard criteria, it is unlikely to be meaningful to another lender. In these circumstances it would be unfair for a lender to process the data to assess an individual’s credit worthiness.
4 It is an accepted industry standard to record only serious ‘defaults’ with credit reference agencies. The term ‘default’ on credit reference files is used to refer to the situation when the relationship between the lender and borrower has broken down. A record showing a series of payments as six months in arrears when this does not reflect the real payment history should not be used as an equivalent of a default. Where a code is used to describe a default or variation in payment, it should always be accompanied by an explanation in plain and intelligible terms which informs the reader of its meaning.
The terms ‘default’, and ‘satisfaction’ or ‘satisfied’ as used in this guidance note are not intended to give a precise legal definition. The term ‘default’ is discussed in greater detail in the section ‘The definition of a default’; the conditions under which the term ‘satisfaction’ should be used are discussed in the section ‘The settlement or satisfaction of defaults’.
This guidance note also refers in some instances to bankruptcies, IVAs and the assignment of debts. When it does so, it should be read to include the Scottish equivalents of sequestration, trust deeds that have the intent to create a binding arrangement similar to an IVA, and the assignation of debts.
1 For the purposes of this guidance the term ‘lender’ may include companies which extend credit without making loans, for example, a telecoms company or utility.