Now that the pressure is increasing on the bad behaviour of banks it is about time to turn our attention to the so-called credit reference agencies.
These are the agencies responsible in the main for driving a huge number of borrowers in to the sub-prime category, often based not on affordability, but on a late payment on a credit card or the rightful shopping around for a lender with decent rates.
Such prudence leaves a ‘footprint’, which in the tortured minds of some lenders means there is desperation in the person searching for a loan.
The reality is often simpler: credit reference agencies are the clients of the big lenders and, as we now know, even of pay-day lenders.
These are the firms who pay the agencies who provide the bread-and-butter payments to these agencies; they are also the firms who keep feeding the credit reference agencies’ files, piling up data about customers who, in the majority of cases, are not even aware that their credit records are being seriously disfigured.
It is patently unfair and gives member firms enormous power over ordinary borrowers who, unless they have a credit trail, are often turned down for credit.
In the case of some mortgage lenders, prior to the sub-prime crisis, decent borrowers would often go seeking a prime mortgage, would be turned down but referred on to the lenders’ own sub-prime subsidiary (even at the same interview) for a loan of the same amount, this time only at a higher rate. That, in simple terms, is almost certainly theft, certainly it is immoral.
The regulation of credit reference agencies must move up on the list of priorities for the City regulator.In fact, there is no reason why the only route to a black mark on a person’s record should not be through a county court judgement.Until we control these unregulated organisations the sub-prime sector will continue to grow like wild mushrooms.
Hal Austin is editor of Financial Adviser
