It’s natural to be inquisitive with a lot of things in life. One of these, as far as consumers are concerned revolves around the way credit agencies do their work gathering and compiling information regarding our financial activities.
Just how do they do it? On what grounds were they authorised to do it? There are so many questions behind the way credit reporting is done but all of these can be answered by one important document: the CRAIN.
If the all-caps weren’t a dead giveaway, CRAIN stands for Credit Report Agency Information Notice. This document is an industry-wide notice that was developed in preparation for the new General Data Protection Regulation (GDPR) that went live on 25 May 2018.
Created in conjunction with the big three credit reporting agencies, TransUnion(formerly known an CallCredit), Equifax, and Experian to gather, share, and process any information regarding you (even private ones) with the goal to give you a fairly accurate report of your recent credit activities.
Ultimately the aims of CRAIN are to continue to support responsible lending, to help combat fraud and money-laundering and assist consumers with fairly repaying and lowering down debt levels.
As Steve McNicholas, Managing Director – Credit and Marketing Data, Callcredit Information Group, said: “We are in the age of the empowered consumer where we all recognise the importance and value of our own personal information.
CRAs are an integral part of the consumer lending process and wider information ecosystem. Helping people understand how their data is used and shared and how they can challenge its accuracy is an important issue. We often take for granted how data sharing has evolved and now enables people to apply for tailored financial products and gain an instant decision. The mechanics of what sit behind this are of increasing interest to information hungry consumers – transparency is key.”
Don’t think of this as a full list of what credit information the agencies can gather from you, however. Each agency has their own set of information they deem vital for their reports and as such would look for entirely different things across all your public information.
However, what it does tell you is that the agencies will be quite extensive when it comes to gathering information from you. If you’re uncomfortable with that, then there are some remedies provided for you which will be discussed a handful of paragraphs later on.
Naturally, you will think of reasons why agencies are allowed to gather all this kind of information from you. However, it must be clear that none of this would be possible unless the agencies are allowed to do so under the law. So, why did UK law allow for agencies to gather it? There are several legitimate reasons for that:
Naturally, credit agencies would want to thrive in a system where they can sell highly valuable products and services to customers that ultimately qualify for them. To promote this kind of system, the law must give the agencies the authority to gather pertinent information regarding a person’s credit history to make sure that they can qualify for the right kind of credit depending on their circumstances.
In the interest to prevent thieves from gaining access to your information as well as impersonating you in various credit transactions, these agencies would want to know as much about you so that they can verify you in case of any attempt by any criminal to defraud and steal from you.
The different agencies are required to provide a number of services aimed to help consumers in a number of cases. This includes the collection of outstanding balances or confirming the identity of delinquent account holders. Normally, they can’t do this if they couldn’t gather every possible piece of information regarding them especially any data that can establish their credit and debt management pattern.
Credit reporting agencies are also required to comply with the law as much as credit holders are. For instance, UK credit law as mandated by the Financial Conduct Authority require loan companies to always check if an applicant is fully qualified for a certain type of product. To do that, these loan companies will rely on the services of a reporting agency to get information regarding that applicant.
Simply put, since loan companies are required by law to always check on an applicant’s qualifications, they would need information about that applicant that only a credit reference agency can offer. In the interest of helping the loan company follow the law, it is required for the agency to gather that information and present it to them to aid the application.
This is quite an important question since critical personal data is being passed around by businesses and agencies. As such, you would want the assurance that your data is not going to be indiscriminately used against you or violate your constitutional rights as a UK citizen. The answer is yes.
Think of it this way: whenever a law authorises certain groups to exercise certain actions, the law also sets up various limitations and implementing rules to make sure that these agencies do not violate the rights of a person when performing these actions.
One of these limitations is that the agency cannot just share this information to anyone else. That requesting person/entity has to meet certain qualifications in order for their request to be approved.
And if you find out that your rights have been violated by that loan company and that agency, which constitutes as a grave abuse of discretion on the latter, you always have the ability to dispute it or take the matter to court.
Without these safeguards, the law itself would be constitutional and its continued existence will result in something similar to what was depicted in George Orwell’s 1984.
So what are the agencies going to do with all of that information? The data gathered could be used by a number of ways but what CRAIN allows for will only include:
The primary purpose for gathering credit data is to establish your pattern of credit activity of sorts. This could be important for a number of reasons:
Perhaps the biggest and most persistent problem in the world of finance, fraud is the cause of nearly thousands of pounds lost in various markets across the world. Dealing with fraudsters can also be a game of cat and mouse as criminals tend to up the ante when agencies beef up the security of valuable information in response to criminal activities.
The CRAIN also authorises the three main credit reference agencies in the UK to act as a Fraud Protection Agency. This means that they can perform a number of actions which will include:
What is important to understand about credit reporting agencies is that they are not an official government branch. They are merely granted permission to operate in a local area and, through the CRAIN, are authorised to perform actions on a purely information-gathering level.
What does this mean? It means that they can’t sanction you for anything. For instance, if the data they gathered paints you in a negative light because you had bailed on your debts more than once or you tend to max out your credit limit quickly, they can’t do anything about that. They can’t even tell a loan company to reject your application.
However, the information they can gather is more than enough to help lenders make important decisions regarding you. Sure, some lenders are quite lax and might approve your application despite your credit history. But that is on them, not on the reporting agency.
One of the safeguards that CRAIN employs against potential abuses of discretion is limiting the number of people that the credit reference agencies can provide information to regarding an applicant. As such, nobody can ask an agency to pull up your credit history unless they are part of any of the groups below:
Of course, any business that engages in the selling of products would want to know if a client is qualified for a certain product or service. For instance, a car company might deal with you but would want to make sure that you have what it takes to pay the installment. As such, they can contact your reporting agency for any pertinent credit information.
Businesses that primarily deal with credit-type products and services such as loans will want to determine if you are a low-risk person to do business with. As such, they are first in line when it comes to credit report request priorities. In fact, the CRAIN was primarily designed to help these companies more efficiently.
Also, creditors can ask an agency to track your current whereabouts especially if you transferred premises without notifying them.
Since fraud is quite a prevalent problem nowadays, law enforcement agencies would gladly welcome any help that is available to them regardless of its shape and form. The information provided by the agency will be vital in preventing identity theft as well as in tracking down thieves.
Of course, the authorities can use agencies against you especially in any crime that involves money. If you’ve deceived someone or a company by issuing a bounced cheque and disappeared for several months, for example, the authorities can compel a credit reporting agency to prepare for them your credit report and determine where you are currently.
Legislators might also ask a reporting agency to provide them with the credit information of their constituents so that they can use it for statistical purposes. That data might be vital for the crafting of new consumer protection laws. It might even be used for other purposes such as investigating tax collection complaints and studying the performance of industries within that region.
So what’s your stake in all of this? Believe it or not, you are not excluded from the provisions of the CRAIN does allow you to enjoy from certain rights.
For starters, you as the credit holder have every right to know what information is being gathered about you. UK law allows for credit holders to request a credit report for free once a year from their CRA of choice. As for the rest of the year, they can expect for the CRA to deliver them one through the mail or e-mail.
Also, they can request a statutory credit report from a credit reference agency at any time of the year. There will be a processing fee of £2 per request but that does not remove the fact that you should be entitled to a report every time you request one from an agency.
There is also the matter of data portability. Whenever you consent to a company doing a hard search on your credit report, you are entitled to receive a copy of such in a more compact and portable form. Also, the summarised report must be sent to your address at the same time when the agency delivers the report to the requesting lending company.
What if there is a mistake on your credit report? Would that have to stay on your record forever? The answer is no. In the instance that you think that the credit report you received has some erroneous data, you can always dispute it.
For instance, you look at your credit report and find out that some transactions there were not authorised by you. This is a telltale sign that somebody has stolen your identity and doing transactions on your behalf.
You have every right to notify the agency about the error and request an amendment. Some mistakes are clerical in nature which means that the changes are merely formal such as your name, address, and account number. Some changes, however, are substantial since they can affect your overall score. This includes removing or adding entries in your payment history and list of balances.
But what if the agency objects to your claim? You have the right to take the case to the proper mediating bureau or, better yet, the courts. In either forum, you have better chances of getting the agency to make that change but only if the decision of the arbiter/judge is favorable to you.
How often do you hear heavyweights of an industry working together? Isn’t it welcoming to know that there is a shared, single voice about how the industry is being driven. Much better surely than if agencies all had separate agendas.
CRAIN does offer a lot of oversight to credit reporting agencies in regards to the information you have put out in public. It can be a bit worrying to think that such a directive allows several agencies to have tighter control and transparency over your information.
However, you can be assured that you are not given the short end of the stick when it comes to CRAIN, either. You can use it to your advantage to have a better grasp on your credit performance as well as make sure that your credit information reflects the truest account of your financial activities.
What other issues with CRAIN do you have? Do you know of other ways you can use the document to your advantage? The comments section below is open for all sorts of discussions.