These days, with bank lending at its lowest - just €450m was approved in new lending in the first quarter (Q1) of 2012, down 96% from peak in Q3, 2006 – it has never been more important. You need a sterling credit record and capacity to repay your loans over the entire term to qualify as a borrower.
The only credit that isn’t so difficult to secure – and that is also a very qualified comment since credit card interests rates are eight times that of mortgage ones – is on a credit card balance. But it’s also one of the most common ways to impair your credit record by missing a payment or not having sufficient funds in your account to pay an automatic credit payment.
Last week’s revelation by AIB that is misrepresented the credit position of 12,000 of its customers to the Irish Credit Bureau (ICB) between 2006 and 2012 by exaggerating the number of defaulted payments (for example, 4 missed weekly payments were reported as four months of missed payments, a far more serious and reportable default) is a blow to the already very low public reputation of the bank and very mixed news for its customers who may have been financially penalized unnecessarily.
Any one of those 12,000 known customers who were victimized by the bank (and there really is no other way to describe it) may have had to pay more for any credit they did secure in the period. They also, of course, may have been turned down for a loan.
The ICB has corrected AIB’s mistake and the credit records of the 12,000 customers have reverted back to what they were before the error. But now the question that needs answering is how the bank will settle up with their customers, which they say will happen on a case-by-case basis.
The Data Protection Commissioners have now informed all the banks that their credit rating processes will be audited in light of the AIB event.
Meanwhile, anyone with an AIB loan taken out since 2006, but who did not receive a letter informing them that they were one of the unlucky 12,000, should still check their credit rating with the Irish Credit Bureau to see if their record is impaired or not. Too many people accept without question when their bank says, ‘yes, we’ll give credit, but at a higher rate of interest’. Too often they do this because most of us, at some point, have missed or been late with some credit payment and because we may not understand the mechanism of credit record reporting (there is a five year limit, for one thing).
In light of what has happened to so many known customers at AIB, everyone with a loan in the last few years might want to check their credit record. Checking your credit score is easy: log onto www.icb.ie or call 01-2600388 and fill in a personal credit score application. It will cost you €6 (a fee AIB will refund any of the 12,000 who make an application.)
Your credit record at the ICB includes all the names of lenders and account numbers of the loans you have had or that have been active over the past five years. It will note repayments made or missed for each month on each loan that have been reported by your bank; whether you have failed to clear your loans; settled loans for less than originally agreed and any legal action that has been taken against you.
With this information you should be able to see if any credit reports that a bank or other credit institution (148 of them are members of the ICB) made about you are correct or not. If they are wrong, it is the bank that must make the correction; the ICB only carries out their instruction.
Finally, if you are an AIB customer (or find out your own bank has made a similar mistake) you must decide whether an apology for the error is sufficient. If you were turned down for credit, but didn’t pursue your application with any other bank – and just did without the money – then you are unlikely to be compensated: there hasn’t actually been any loss.
If you did get credit, however, but at a higher cost than if your record hadn’t been misrepresented, then it isn’t unreasonable in my opinion, to expect compensation. That is, the difference in interest between the good score and bad score cost over the term of repayments. You might also want to make sure that any other institution that extended you the more expensive credit realizes what happened and adjusts their records about you as well.
The Data Protection Agency has described this event as on the ‘more serious’ end of the scale of infractions. If you are not happy with AIBs handling of your case, you can take a complaint to the Financial Services Ombudsman. (See www.financialombudsman.ie ; LoCall 1890 882090).