Upheld: incorrect credit file reporting following bankruptcy complaint against The Mortgage Works (UK) Plc

Decision detail

Summary

Mr L complained that TMW incorrectly reported his buy to let mortgage as in arrears on his credit file following his bankruptcy discharge in 2020. The mortgage debt was extinguished by his bankruptcy in 2019, yet TMW continued reporting arrears and collection activity. TMW argued it was obligated to report the outstanding mortgage and offered £850 compensation. The ombudsman upheld the complaint, finding that under ICO guidance the mortgage should have been reported as defaulted in 2019 and settled in 2020, with no further arrears reporting. The ombudsman required TMW to remove all mortgage reporting from Mr L's credit file, cease future reporting, and pay £850 compensation.

The Ombudsman's reasoning

As a matter of law, Mr L's mortgage debt was extinguished by his bankruptcy. The ICO guidance states that lenders should report a loan as defaulted on the bankruptcy date and settled on the discharge date. While TMW retains its security interest, it should not report contractual payment failures when no obligation to pay exists. Although TMW was not initially aware of the bankruptcy, once aware it should have amended the credit file to show the correct position. Since defaults and settlements drop off after six years and Mr L was discharged in 2020, the entry would fall off in 2026 anyway. TMW should remove all reporting and cease future reports rather than continuing to report incorrectly and manually delete entries.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website