The debt was re-paid and in fact they have continued to remain as a loyal customer with this telephone company.

Recently they applied for a mortgage and were turned down; this was because a default had been recorded against them by a Credit Reference Agency, due to the mobile phone ‘debt’ from 2 years previously. They were obviously concerned how such a default would impact on their ability to access credit in the future. When they spoke with the Credit Reference Agency, they were informed that despite the fact that the debt had been quickly discharged, the record would stand for a total of 6 years!

When I heard that they would have a ‘record’ for 6 years, I asked what level of debt had they incurred; I discovered that it was £90! That meant for every £15, this young person had been arbitrarily sentenced to one year’s ‘electronic imprisonment’.

I was astonished to also hear that they had not received any notification that such a record would be created; so no notice, no ability to provide written representation and certainly no written notice that they had been sentenced ‘in absentia’.

In a world when finance is conducted in the blink of an eye, the consequences of being ‘detained’ in an ‘electronic prison’:

1. Will clearly result in a denial of further credit;
2. The inability to build and grow domestic life, and
3. The prospect of having to seek loans through ‘regulated’ high-interest loan companies, just to survive (I intend to write further on this point)!

In my view, this Dickensian world reveals more about the British and indeed UK Government’s attitude to debt, whilst conveniently ignoring the social and personal reasons for why debt arises. One article reveals that by the end of 2016, each UK household will carry an average non-mortgage debt of £10,000. It argues that this debt is precariously balanced because of current low interest rates, leading to the fear that the British are complacent about personal debt; I suspect that this is just one fear!

Governmental attitude is best expressed through the provision found in Protocol 4, Article 1 of The European Convention on Human Rights (ECHR); it addresses the old methodology of throwing people into a Debtors Prison and outlaws such a practice, it states:

“Prohibition of imprisonment for debt: No one shall be deprived of his liberty merely on the ground of inability to fulfil a contractual obligation”.

Whilst virtually all of the ECHR has been ratified by Member States/Contracting Parties, only 2 countries have thus far refused to ratify Protocol 4, Article 1:

Turkey & The United Kingdom.

Why on earth would the UK Government fail to ratify such a provision; we no longer have ‘Debtors Prisons’ with walls, but we do have new detention areas in cyberspace – is the Government helping the contractual order of the companies that occupy this space against a threat that legal action would challenge this new form of ‘electronic imprisonment’?

The 18th & 19th Centuries saw 10,000 people in England sent to Debtors Prison each year. Whilst we like to think that we are more enlightened in the 21st Century, it begs the question; how many Britons are now sentenced to a term of ‘electronic imprisonment’ each year – how many with minor debts know that the world of Finance have condemned them?

In trying to help this young person, I naturally turned to The Information Commissioner (ICO) as this primarily concerns issues of data.

The ICO provides a useful guide to Credit and Credit Reference Agencies and they remind the reader that, ‘Nobody has the right to credit’.

In holding information, Credit Reference Agencies must demonstrate that they have a ‘legitimate reason’ for doing so, namely:

1. You must need to process the information for the purposes of your legitimate interests or for those of a third party to whom you disclose it;
2. Once the first has been established, is that these interests must be balanced against the interests of the individual(s) concerned, and
3. The processing of information under the legitimate interests condition must be fair and lawful and must comply with all the data protection principles.

The ICO further advises Consumers that:

“If you have contacted the credit reference agencies and the original lender and there is an obvious inaccuracy which they are unwilling to correct then you may wish to report your concerns to the ICO. Please note that it's not our role to decide on financial disputes”.

My own experience with Consumers has revealed that despite the wide range of sanctions available to the ICO, enforcement actions are not evident. I am often told by Consumers that they are advised by some ICO officers that if they were unhappy with their findings, they could always take the matter to court! Frankly, in the cases I am aware of, this advice to Consumers is unrealistic; ordinary Consumers simply cannot afford to go to court to enforce their rights, that is why Government appoint agencies to enforce those rights; apparently!

The ICO, along with Industry input, has however created a helpful guide entitled:

‘Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies’.

Essentially a default may be recorded if you do not keep up your payments and it demonstrates that the relationship has broken down between you and the lender.

However, Section 4 sets out the key components when such a default may be recorded against you; here are just some of the key elements:

1. A default is recorded at 3 months of the debt occurring and certainly by 6 months;
2. If, however, you agree to repay those arrears with the lender, then no record of default should be recorded – if you break that agreement, then a default will be recorded;
3. There are several more exceptions to when a default may be recorded by qualifying period or product type;
4. The lender must advise you that a default will be recorded and they must do so 28 days before it is so recorded;
5. A default record rests for a period of 6 years (note: Coincidentally, this is the limitation period in England & Wales for Contractual disputes);
6. Default notices should not be deployed if you have paid the amount back or you agree with the lender to pay the money back and stick to that agreement.

In this document, the ICO expands their explanation on how they will help Consumers when they state:

“Where there is a problem with the content of a CRA record, you should contact the organisation concerned to give it an opportunity to put things right. If that fails, you can contact the ICO helpline on 0303 123 1113. Please note though that we can only deal with issues to do with the accuracy etc. of your record, not with lending decisions based on it”.

For the young person who contacted me, matters may not appear to be so critical if they follow their rights as defined by the ICO and use them to help resolve this serious matter.

However, as I look into the world of debt, the reasons for that debt and how ordinary people are condemned to a new form of servitude and risk, I am left wondering why our Members of Parliament, who it seems, have expressed a strong recent desire to make more laws in Parliament, have allowed this sector to go unchallenged and for Consumers to suffer detriment?

Perhaps an MP would like to respond how they will legislate against this new form of servitude and what steps they will take to ensure we ratify Protocol 4, Article 1 of the ECHR?

© Frank Brehany 2016 - All Rights Reserved (First Published on 16/4/16)