From a credit providers perspective, these are understandable concerns as the ethics in regards to the removal of a negative credit listing. This could be viewed as an attempt to mask the applicant’s true financial position and not allow them to apply an appropriate risk rating. Certainly, these concerns are founded if the credit listing in question is genuine in nature and therefore a true and accurate reflection of the credit-worthiness of the applicant. However what about a faulty, incorrect or just plain unfair listing?
A true reflection of the borrower’s ability to pay
As it is appropriate for a credit provider to score an applicant on a genuine negative credit listing, it cannot be appropriate to judge in the same way when the listing is incorrect. To do so would be the same as throwing the applicant in prison even though they did not commit the crime. Of course, credit providers cannot be expected to trawl through credit listings in an attempt to work out what is and is not correct, and can only react to their existence and apply a risk rating accordingly.
Some credit providers and credit reporting agencies have been highly critical of companies offering credit restoration services. Not all credit repair companies operate in an ethical fashion. This has no doubt contributed to their sentiment, however, many of the same people that question the moral standing of this industry would be the first to demand a credit listing was removed should they become the victim of a faulty or incorrect listing, it’s very easy to judge when you are not the one affected.
Is the credit reporting system fair in Australia?
The credit reporting system has not been kind to the Australian consumer. In today’s tight financial market even one small negative credit listing has the potential to affect someone’s ability to obtain credit for years. In fact, a simple misunderstanding with a phone carrier can lead to a default listing that will be recorded for up to five years. To think that someone could struggle with getting a home loan due to something that potentially happened years earlier doesn’t seem appropriate nor is it necessarily a reflection of their current financial position. The question “does the punishment suite the crime?” must be asked.
Of course, there are credit providers that make a very good living by specialising in dealing with people that have credit problems. Naturally, the rate for risk applies, and the costs and interest rates charged by these lenders are generally well in excess of what would be expected from a mainstream provider. While this may be appropriate for some clients it does seem a shame that people who have been the victim of an inappropriate credit listing are “tarred with the same brush” and suffer as a result.
Consumers have rights
Services provided by non-conforming lenders are providing a valuable service, but consumers may be the victim of an inappropriate or faulty credit listing and should not just have to just “suck it up”, paying higher costs for finance as a result of a mistake on their credit file. They should be able to protect their rights.
This is about protecting people’s rights. Just as if you were in court being convicted of a crime you didn’t commit you still have the option to plead “not guilty. Defending your rights with regard to an incorrect credit listing is no different.
In many ways, a negative credit listing is no more than an allegation. Most consumers never challenge that allegation and suffer, sometimes unnecessarily for years as a result. Given the listing is incorrect the consumer has every right to take an affirmative defence and insist the listing party substantiate their allegation.
We belong to a fundamentally capitalistic society and the credit reporting agencies capitalise on consumer information. Unlike our legal system, the credit reporting agencies take no oath to truth, equity or the common good. No person has a moral obligation to support any business venture, much less one that has the potential to destroy his or her financial life. If the credit reporting agencies remove an accurate credit listing after a period of time, such as five years for a payment default, why is it inappropriate to do so in less time if the listing is found to be incorrect?
Credit bureaus do not concern themselves with the impact on consumers. Primarily their profit margins guide their judgment rather than consumer rights.
Is it ethical to repair a person’s credit?
Credit history information can misrepresent the credit-worthiness of the consumer. When a credit provider inappropriately labels someone as not credit-worthy, they damage everyone…the credit reporting agencies, the economy and most importantly the individual.
With these points in mind, the removal of a genuinely contestable negative credit item is without doubt, ethically sound.