Credit Union reporting to CRA

[acid53]

Hi,Just recently my local credit union who I have been with over 20 years have started reporting to CRA. They also do a full credit search which is recorded, possibly because of new FCA regulations, which caught me by surprise as I was sometimes rather creative in revealing the full extent any debts I had to them. However, they were also the last port in a storm and saved my bacon on a number of occasions. What seems rather unfair is they just report the loan amount but not my current share balance with them. Is this valid? Anyone else experience of this?

[citizenB]

I think they are only allowed to record borrowing aren't they ?

 

Would you really want them to record shareholding/cash savings ?

[acid53]

thanks citizen, well as i owe them 7k and have 3k of savings then it would make my oustanding debt look a bit healthier on my credit report! Do you see any downside reporting what the savings?. The 3k savings are secured against the 7k debt anyway via promissory note so not as if I can do what I want with them

[citizenB]

As long as you are maintaining the contractual payments toward the loan then I don't see what the problem is - it can only look good that you are making the payments.

 

If I have say a credit card with a bank and also an ISA with the same bank.. I sure as hell wouldn't want the credit reference files showing that I had money in the ISA.. just because they were reporting regular payments on the credit card ?

[acid53]

well as soon as the account got added to the CRA my credit score went down substantially - just think it would be much better if it showed i owed 4k instead of 7k. the 3k is offset against the loan so not really the same as having separate savings

[citizenB]

Have a word with the Credit union and ask why this would be. I would have thought if you are maintaining the account in a responsible manner, it should have stayed the say !

[citizenB]

We have a CU rep on the forum, I will track her down and ask for her comments.

[citizenB]

Have you spoken to the CRA to see what they have to say about this ?

 

I have sent S.O.S. to the Credit Union Representative.

[SparklesJD]

What seems rather unfair is they just report the loan amount but not my current share balance with them. Is this valid? Anyone else experience of this?

 

Hi Acid53 & CitB,

 

Yes, it's valid as far as I know (see below). We've not had anyone query this yet - which isn't to say that they're all happy with it necessarily.

 

A bit of background which you may or may not be interested in. The DWP, for a number of reasons, which vary in believability depending on how many conspiracies you believe, have put a significant amount of money into CU infrastructure and back-office improvements to make the sector fit-for-purpose.

 

One of these improvements has been the introduction of an Automated Lending Decision making tool (ALD). This enables us to see all those debts, aliases and defaults that members creatively hide from us

 

The FCA are relevant here only in that once we have the information, it forms part of the 'know your customer' stuff, assuming we're following the other regs. I don't know what their view on the gross vs net borrowing reporting would be, they may feel it enables other lenders to make a more informed decision, or they may not. There are other financial institutions where you might have savings, loans, a credit card, a mortgage... it would be a big can of worms to open IMO.

 

My CU have the ALD and the reduction in our bad debt levels, now that we can see the member's situation properly, is dramatic. We've always asked for credit info, but didn't get this degree of detail and although we explain to members that it's better to be honest, clearly not everyone feels able to be as truthful as we'd like - because, yes, sometimes we wouldn't be able to lend.

 

We only use the ALD (info provided by and to Experian) when someone borrows, not for account opening, and we do not report savings - I believe that CitB is correct that it's not actually allowed (I think under the Consumer Credit Act from a vague memory?), it's not something that we have even considered to be honest and I agree with Cit B and think our members would be dead against it.

 

The net borrowing position would look more favourable, particularly if as in some CUs you are asked to save as you repay, but we're asked for the loan amount that was applied for and what was approved, not net amounts and we'd probably be breaking our agreement with Experian if we started using net lending figures (aside from whatever the regs say about reporting savings).

 

Whilst I'm not entirely sympathetic, for obvious reasons, I shall try to be fair:

- Were you asked to sign an up-to-date loan agreement, which would explain that they would carry out a credit search and that information would be shared in return?

- You wouldn't be charged penalties if you want to repay some of the loan with savings, which would bring down your overall debt burden for referencing purposes.

- You could, although I wouldn't recommend it, ask for a note to be put on your file to say that 'the net amount is x' (others on here will be able to explain better than I, but notes on file are rumoured to linger long past the issue itself and can lead to a 'refer' which some high street lenders allegedly treat as a 'decline').

- There are other things we encourage our members to do to improve their rating, but you probably don't need me to go through those.

 

Hope this helps,

 

SJD

 

I am a corporate poster, running a medium-sized credit union in the South of England.

 

Any posts purely represent my own opinion and shouldn't be taken for financial advice or anything more than a well-intentioned pointer towards where you can look for more detailed information.

 

I am interested and have some past experience in the area of employment law, however, please note that I have no pretensions to expertise here! It is vital to get proper advice before making any decisions, the law changes frequently and is very complicated.

 

Please do not PM me, as it is unlikely that I will respond.

Edited January 28, 2015 by SparklesJD
To put in signature.

[citizenB]

Thank you for this Sparkles, very much appreciated

[caro]

The clue is in the name. CREDIT reference agency. Having savings doesn't necessarily usually guarantee the debt will be paid.

[acid53]

Many thanks citizen b and sparkles - very helpful replies. In relation to your q's

 

- Were you asked to sign an up-to-date loan agreement, which would explain that they would carry out a credit search and that information would be shared in return?

YES -yes, they did explictly ask if I agreed to a credit search which triggered my attention! They had never done this before - and actually refused me for the first time ever given my levels of debt which are quite high and to be fair was probably the first time they had a full view on them. After I pointed out my good repayment record and significant savings, they then did offer me a loan on the basis of consolidating debts which was fair enough although they insisted on paying the creditors directly ( this was a bit pointless as it was two credit cards of which I could have just went and withdrew the money again or spent again but I appreciate their thinking behind it was to help me)

 

 

- You wouldn't be charged penalties if you want to repay some of the loan with savings, which would bring down your overall debt burden for referencing purposes.

My local CU do prefer you to save whilst borrowing and think it is really six of one or half dozen of the other in that I believe my savings are security against the current loan and I couldnt touch them anyway

 

- You could, although I wouldn't recommend it, ask for a note to be put on your file to say that 'the net amount is x' (others on here will be able to explain better than I, but notes on file are rumoured to linger long past the issue itself and can lead to a 'refer' which some high street lenders allegedly treat as a 'decline').

 

 

yes ill steer away from that course of action with notes on my file in case it comes back to bite me later!

 

Having got into the payday lending trap, I am a big fan of credit unions and as I have said they have been my lender of last resort on a number of occasions. My only general concern is if they move into the realms of credit checks and the like with ALS method you describe for example, is this ultimately not more likely to disadvantage those people who don't have access to mainstream credit because of poor credit history/score? Appreciate bad debt and risk needs to be managed but quite a lot of people like myself were able to rely on a good repayment history instead of a good credit rating. Interestingly when they refused me initially on this loan, it was for an amount less than I had previously borrowed

 

Caro, know what you are saying although my current bank accounts report positive balances on my credit report so seems a bit contradictory that a positive balance is not reported but perhaps because it is regarded as savings rather than a current account

[caro]

Just guessing here. but maybe the credit balance on your current account is reported as you have an overdraft facility.

Edited January 29, 2015 by caro

[SparklesJD]

No worries

 

My only general concern is if they move into the realms of credit checks and the like with ALS method you describe for example, is this ultimately not more likely to disadvantage those people who don't have access to mainstream credit because of poor credit history/score? Appreciate bad debt and risk needs to be managed but quite a lot of people like myself were able to rely on a good repayment history instead of a good credit rating. Interestingly when they refused me initially on this loan, it was for an amount less than I had previously borrowed

 

I can understand the concern, some of our Board had similar worries before we started using it, but I don't think that it will and in my experience, it hasn't so far. We can put in our own criteria and tolerances and we can always override the system. For example, a long-standing relationship with a member still counts for a lot in most CUs.

 

What it has done is to allow us to cut the costs and become more sustainable. In turn we can offer competitive rates to more affluent members, which we need to do so that we can continue lending to our traditional customer base at affordable rates.

[acid53]

thanks caro and sparkles for replies - yes i do have an overdraft so perhaps that is why my balance is being reported.

 

good to hear that the CU are not solely relying on the credit reference agencies - the world has gone a little mad with this stuff I fear. Given how some payday loan companies were allowed to act in an almost criminal manner, it is galling that they have the luxury of recording their toxic loans on a credit file which is almost a double whammy

[SparklesJD]

Remember that potential credit is also a contributing factor to credit score - so if you have credit cards for emergencies, etc. they can go against you, even if you have a zero balance - obviously the theory being that you could take out a loan then run up more debt on the CC.