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Data Protection Act And Your Credit Rating

30th July 2012

In this article we review how the Data Protection Act (DPA) should influence the way that your credit rating is calculated after your discharge from a Scottish trust deed. In particular we investigate the ramifications of a relatively new phenomenon, namely a trustee remaining “in office” to investigate PPI claims after you have been discharged from a protected trust deed.

In recent times “trustees” (the professionals that set up trust deed Scotland arrangements) have been instructed by their regulators to look into whether PPI claims can be made on behalf of a client. The aim is to try to raise further funds that would lead to creditors receiving back more of the debts owed to them. PPI claims can take a while to process, meaning that some people may complete their other obligations to their trust deeds prior to all PPI claims being completed.

To avoid a delay in their client’s discharge, many trustees have discharged the client from the trust deed (and their debts) but have not discharged themselves. Remaining in office, they can continue with the PPI claims. This will often mean that the creditors have not received any dividend from the case at the time the client is discharged, and therefore consider that the trust deed isn’t complete from their perspective. They therefore fail to update the credit file of the individual that has been discharged.

The net effect of this is that the individual is not in a position to influence significant improvement in their credit rating, despite having actually been discharged from their debts. Default notices may remain unsatisfied, and accounts on the credit file may continue to appear as though significant sums are due. Other lenders will naturally be wary about lending to someone in such circumstances.

The information that appears on your credit file (and which therefore influences your credit rating) is subject to the Data Protection Act. The DPA is monitored and enforced by the Information Commissioners Office (ICO). We contacted the Information Commissioners Office to enquire about their expectations as to what should happen where an individual had been discharged from a protected trust deed, but their trustee had not (and therefore creditors may not have received any payment from the trust deed).

The ICO were very clear in their response to us. The principle being applied could loosely be described as being one in which creditors are required to “reflect reality” in the information that they report about an individual to the credit reference agencies. The facts that the trustee has not been discharged, and that the creditor has not yet received a dividend from the trust deed, are both therefore irrelevant.

What is relevant is that you have been discharged from the trust deed, and therefore any unsecured debts that previously existed no longer do so. Creditors are expected to update this status with the credit reference agencies. This will involve marking default notices as being satisfied (or at least partially satisfied) and making sure no debt balances show as being outstanding. From this solid base it is much easier for an individual to begin to improve their credit rating for the future.

It is clear from our forum that creditors in this situation, in many instances, are not updating the credit reference agencies in this way. This has led to frustration for some Trust-Deed.co.uk members who believe their trustee is frustrating their potential to improve their credit rating by remaining in office to deal with PPI. In fact this is not the case; the creditors are at fault for not providing the update.

If you find yourself in this position the steps that we suggest that you take are:

  • Contact each creditor that has not updated your credit file once you have been discharged (give them a few weeks to make the updates first).
  • If they fail to update your credit file within a reasonable period of time, formally complain to them. This may lead to someone more senior reviewing the situation and helping.
  • If their complaints process fails to deliver the right outcome, or they do not respond, you can contact the Information Commissioners Office to set out your concerns. Where they believe it to be justified, they may “encourage” the firm to make the due update.

It’s important to remember that this work falls outside of the scope of the duties of your trust deed firm. It may be frustrating that your trustee has remained in office to deal with PPI, especially if you do not believe that any claims should be made, but they have little option given the instructions they have received from their professional bodies. However, this need not stand in the way of you working on your credit rating after a trust deed. A little effort made should result in some significant progress in rehabilitating your credit rating for the future.

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Wylie & Bisset Grant Thornton

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