What Can Go On Your Credit Report After Signing A Trust Deed?
22nd September 2014
This article covers the subject of what creditors can (and cannot) continue to report to the credit reference agencies after you have gone ahead with starting a protected trust deed to tackle your debts. The interesting forum thread which led to us researching this article can be read here.
What did we know already?
Creditors may issue default notices which will be recorded on your credit file. They should not be dated substantially after the date that your trust deed began. If they are dated much later than this, you can ask the creditor to backdate the record. Default notices will be removed from your credit file six years after the date of entry.
“Default Notices” versus “default account status”
Creditors also sometimes update accounts with a “status” each month. This might (for example) be “1” if you’re one month behind, “2” if you’re two months behind, or “D” if you’re substantially behind. This is monthly reporting – not a one-time event like a formal Default Notice.
Note: We are not 100% clear whether a creditor can use the “D” monthly reporting status if they have not yet issued a formal Default Notice.
So what’s the issue?
Forum posters are concerned that a creditor can continue to report monthly on an account that is subject to a protected trust deed. This means that negative credit reporting could continue to be added long after a formal debt arrangement began. Anything that goes onto your credit file stays there for six years. Therefore the concern is whether continued monthly credit reference agency reporting will leave a “stain” on a credit report long after the trust deed “drops off” six years after it began.
The Information Commissioner’s Viewpoint
The Information Commissioner (ICO) is responsible for data protection matters in the UK. Here is their viewpoint, provided to us, on continued monthly reporting after the start of a trust deed,
“As to whether the creditor should be informing the credit reference agencies of missed payments after a PTD is in place is an area we couldn’t provide advice on”.
You’ll understand that this response doesn’t get us anywhere in finding a definitive answer to the subject that has been debated. It was acknowledged verbally by our contact point at the ICO that this subject was very complex. The sticking-point is that the likely arguments of creditors and debtors both have merit but are incompatible with each other.
The ICO did inform us that they’re happy to welcome individuals putting their personal cases to them on this subject. However they appear to be struggling to provide any general principles to us by which such a case would be judged, other than the content in the paragraph below.
“Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies”
The ICO did point us towards the above-named document which you can read in full here. It’s a set of principles drawn up by the ICO in collaboration with the credit industry. Some extracts apparently relevant to personal insolvency and this subject include:
This passage seems to suggest that creditors certainly should continue to report to the credit reference agencies after issuing a default notice and after you have entered a Scottish trust deed.
“Your record should be closed and marked as partially settled if: (1) The lender accepts final settlement of the account for less than the balance outstanding or (2) Your account is included in an insolvency such as a bankruptcy or IVA which is discharged/completed and less than the full amount is paid”.
“The fact that the account was previously in default will remain on your credit file for 6 years from the date of default. If the account was not in default, the record would remain on your credit file for 6 years from the date of closure”.
These passages seem to suggest that you might want accounts included in your protected trust deed to have had Default Notices issued on them. Our reading is that where there’s a formal Default Notice, the whole thing should drop from your credit file six years after it was entered. Our reading is that this would include any subsequent reporting after the date of the Default Notice.
Our reading of the above is that, where a Default Notice has not been issued on a credit account, any monthly reporting during your trust deed will remain on your credit file for a period of six years from the date of each individual entry. To put it another way, evidence of problems repaying an account could remain on your credit file until six years after you have been discharged.
Do creditors have to issue a Default Notice if you enter a protected trust deed in Scotland? It seems like they probably should do so:
The principles described above (and in the full document we have linked to above) seem to suggest that most people will not have to worry that negative credit reporting during their trust deeds will have a lingering negative effect beyond six years. That’s because most accounts should have been formally defaulted.
This may not be the case if you have creditors that did not issue Default Notices on your accounts. However, without a Default Notice having been issued this account might in fact be less detrimental to your creditworthiness in the short-term even if data remains on your file for longer.
It should be taken into account that we’re reviewing principles rather than rules in this article. However, the above content might be useful to you in correspondence either with the ICO or with a creditor customer service or complaints department if you wish to raise an issue with them.
Please also take into account that this is a very complex area (for all involved) so the conclusions that we have drawn might not be correct and/or may not remain correct in the future. We do hope that this article helps to provide a greater insight into the issues and principles at stake though.
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