How do you report on your customers post sale? Whose best interest are you considering?

Reporting to credit reference agencies (CRAs) on your customers’ accounts post sale has been one debated by the industry for a number of years. The process of how this is done is often based on what is deemed the easiest and quickest solution, meaning there is no one standard approach. We believe this inconsistency is unfair. It feels as if this is one of the last hangovers from the days where highest price and speed of transaction (ask no questions) were industry standard practice.

The inconsistent approaches adopted can mean consumers find that what is recorded on their credit report is dependent on who is selling the debt and who is buying it. In a world where customer treatment and fair outcomes are at the heart of everything we do, is it right that the sale of an account may show up differently on one consumer’s credit report compared to another, depending on which companies are involved in the process? The impact of this is that their ability to manage their financial affairs will vary.

There are currently three accepted methods in the industry on how a credit record can be transferred from a seller’s to a buyer’s CRA portfolio. They are:

1. Delete and re-add – this is where a seller will delete the entire credit history and then the buyer will re-add the account, with no history in their monthly CRA submission
2. Full Transfer – this is where the complete credit history is transferred by the CRA from the seller’s to the buyer’s portfolio
3. Flag and re-add – this is where a flag is marked on the sellers record indicating the account has been sold and a new record is opened by the buyer

It is common practice to see all three of these methods being regularly used throughout a single year of transactions. Steering Committee on Reciprocity (SCOR), the industry data sharing oversight body, has issued guidance putting the responsibility on to the sellers and buyers to agree a process. However, at TDX Group, because we act in the centre of the industry, working with buyers and sellers on transactions, we have seen issues with all of the methods and none of them have proven to be fool proof. Some examples of problems include: duplicate records being live for a consumer; no records being available; or the flag not being marked before the new record is uploaded – all of which have a different impact on the consumer.

At this stage we are not calling for one method over another, although we do believe it is time to stop option 1 (delete and re-add). This is the method we often see employed because it is the most straightforward process, and yet the impact on the consumer hasn’t been fully assessed. If you asked creditors how they would treat a customer who had an account on their history which started with a default – what do you think the answer would be?

What we are calling for is the industry go through a considered review and ensure that all parties thoroughly understand the impacts; not only the impact on a customer’s credit record at point of sale, but also for the following years thereafter.

The outcome we are all striving for is one of consistency – that is what we ask of our regulator and we believe it only fair that we strive for the same outcome in our processes. In 2016, with the majority of our industry having achieved or nearly achieved FCA authorisation, it seems totally at odds that consumers could be disadvantaged depending on which Debt sale process they find themselves in.

Nick Ollard, Head of Debt Sale, TDX Group