Not upheld: default registration and credit file reporting following fraud-induced financial difficulties complaint against Bank of Scotland Plc trading as Halifax

Decision detail

Summary

Mr H complained that Halifax unfairly defaulted two credit card accounts after he became unable to make payments following a fraud loss of over £40,000. Halifax issued default notices in March 2022 and subsequently defaulted the accounts when Mr H could not repay the arrears. Although Mr H eventually recovered some funds and cleared the balances, he sought removal of the defaults due to their negative impact on his ability to obtain credit. The ombudsman found that Halifax acted fairly by following ICO guidelines and industry practice, as the reasons behind arrears are not considered in default decisions. The ombudsman reasoned that defaulting was in Mr H's long-term interests by suspending interest and charges, and recommended that Mr H lodge a Notice of Correction with credit reference agencies to facilitate future lending decisions.

The Ombudsman's reasoning

The ombudsman found that Halifax followed ICO guidelines and industry practice by issuing default notices when accounts fell into arrears and subsequently defaulting the accounts when Mr H could not repay within the specified timeframe. The ombudsman reasoned that the reasons behind arrears (including being a fraud victim) are not considered under ICO guidelines. The ombudsman also determined that defaulting was in Mr H's long-term interests as it suspended interest and charges, preventing further debt accumulation, and that the credit file impact would be similar to ongoing arrears reporting. The conviction of the fraudster did not change the fact that Mr H was unable to meet his financial commitments in 2022.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website