MoJ consulting on default CCJs… but what about defaults?

The Ministry of Justice is consulting on the current processes in which someone has a judgment made against them without their knowledge.

Finding a CCJ you knew nothing about on your credit record is a very unfair situation. People may only find out about a CCJ at an old address when their mortgage or other credit application is declined, or they fail a tenancy check.

Here are some of the points I made when replying to that consultation, but in this article I want to make the point that finding an unknown default on a credit record is often just as bad news as an unknown CCJ – so this situation too needs to be tackled.

When do unknown defaults occur

Many unexpected CCJs also have a related default on someone’s credit record: not parking tickets, but debts such as mobile and utility bills and consumer credit debts. And often there is no CCJ yet, just the default.

Sometimes these are very small amounts of money: someone thinks they have settled their old mobile account when they get a new contract from a different provider but there is one month more to pay; or a similar situation when someone moves house and there is a final bill from a water or energy company.

Often the texts about the unpaid bill go to the old phone number, or the letters to the old address, so the customer hs no idea.

I could quote dozens of readers’ comments on this topic, but is just one example:

I applied for a mortgage a few weeks ago, although I had the top score from Experian, it got rejected at underwriting. I was not a member of Equifax and Call Credit, nor heard about these two, so immediately got my credit reports from these two companies.  I found out there was a BT bill from 4 years ago for about £61 that was marked as a ‘defaulted’ credit agreement. I was not aware at all of this BT bill as such. I suspect this bill that they sent fell to a period when I moved flats, therefore, it was not forwarded to me.

These defaults can result in someone getting turned down for a mortgage or other credit in just the same way that a CCJ can. So there is no point in only tackling the CCJs, unfair defaults also need to be removed.

Credit records should be both accurate and fair

If someone asks for a default to be removed, they are often told by the creditor that this can’t be done because credit records have to be accurate.

But what is accurate? The point of a credit record is to show how well someone has handled credit. If someone finds out three years later that they owed a small amount on a gas bill from a previous residence and then they pay that straight away, removing the default will give a better picture of that customer’s finances than leaving the default in place will.

Often the customer will have a nearly clean credit record except for this one problem – they have paid all their other bills and debts on time, so what is the chance that they deliberately decided not to pay a small old bill deliberately? About zero. So why is it accurate that a default should be recorded? It certainly isn’t fair. And it doesn’t seem helpful to other creditors wanting to make good lending assessments.

Do the SCOR rules need to be updated?

I suggest that creditors should listen when a customer says they had no idea that they owed that money and that they have paid as soon as they realised they did. If they had always paid on time previously, they had moved house and generally have a healthy credit report, then the facts support what they are saying.  So treat them reasonably and delete the default in this situation.

I think this is the fair thing to so, so it is not out of line with the SCOR rules on credit reporting, where Principle 1 says Data that is reported on your credit file must be fair, accurate, consistent, complete and up to date.

If the SCOR forum feels it is out of line with the current rules, then I think they should consider updating the rules to clarify that this sort of correction is reasonable.

If changes are made to handling CCJs but not to defaults

If default reporting isn’t changed so these unknown defaults can be promptly removed, then amending court processes so that default CCJs can be removed will only be useful for debts which aren’t on credit records, such as parking tickets.

A situation in which a CCJ for a water bill or mobile bill is removed if the debt is repaid but the default on the underlying debt still remains doesn’t seem sensible.

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