At Clean Credit we are often asked to help people remove defaults that relate to credit cards and personal loans.
In many of these cases it is alarming how much unsecured debt some people have and how the payments on these debts often are well in excess of their income. While it is true that people need to be responsible for their own actions, I feel how this debt was originally approved also needs to be considered.
Is it right for credit provider to list a default against someone for a debt that should have never been extended in the first place?, in my option the answer is no. We recently had a client that had four credit card that were in arrears, two from a major bank and two with a secondary provider that we latter learned was underwritten by the same major bank that had provided the original two credit cards.
The non-payment of these credit cards had resulted in four defaults being recorded, two from the major bank and two by the secondary provider.
Upon review it was found that the two credit cards provided by the major bank were in default at the time the client made the application to the secondary lender for two more credit cards.
In other words, two new credit cards were issued when the applicant was already in default and unable to pay their debts. Given the major bank was the underwriter of the secondary provider, the suppler of the two additional credit cards it seems highly inappropriate more credit was approved.
In this example what other possible outcome could the secondary provider expect other than the borrower defaulting? While I am sure not everyone tells the truth about their income or financial position, in this case there is little excuse as the major bank that had issued the original two credit cards was aware of the clients financial position and the fact they were already in arrears.
To provide more credit under these circumstances is in my option unconscionable.
There are a number of laws in place that cover responsible lending inclining The Code of Banking Practice (25 Provision of credit) along with the Financial Ombudsman Service “Responsible Lending Obligations & Maladministration.
I feel a credit provider listing a default that relates to a credit product that should have never been extended in the first place is highly questionable.
While the enforcement process followed by a credit provider prior to the listing of a default may have been correct the fact is in many cases credit should have never been extended in the first place. It is clear that people who cannot afford their current level of debt should not be given more.
We have successfully challenged many credit providers on this basis and have had defaults removed from our clients credit files due to questionable lending practices.