Bad credit records can make life substantially more difficult. The planned amendments to the Credit Information Act would facilitate wiping off bad credit records from credit registers, for example when a debt expires. This could open up an important opportunity to discuss the problem of bad credit records for young consumers who take quick loans.
A Ministry of Justice working group is reforming the Credit Information Act with the primary objective of helping those who fell into debt during the recession years return to being active members of society. The working group has proposed that the expiration of debt would automatically result in the removal of the associated bad credit record. Under current legislation a bad credit record may remain on a register for years, haunting the consumer after the debt itself has expired for good.
Changes are also sought in a few other aspects. Under the proposed new legislation, events such as loan arrangements becoming expired at the debtor's request would lead to removal of the bad credit record, which under present circumstances may remain on register for up to a couple of years after the arrangement has expired.
Bad credit record also for long-term payment problems
It is in the interest of the consumer applying for credit that the creditor assesses his financial standing correctly. Furthermore, it is only fair that credit losses are kept at a minimum as they are indirectly paid for by others through the higher price of credit. As such, it is logical that long-term debt recovery through e.g. deductions from the debtor's salary would result in a bad credit record as proposed by the working group. Previously bad credit record has only been created through finding the debtor insolvent in debt recovery proceedings.
However, care must be taken to ensure that temporary payment problems or short-term debt recovery do not result in a bad credit record. For example, outstanding payments for some public services, such as customer charges for certain health services, may be transferred to debt recovery proceedings without a payment reminder. Late payment of a bill hardly states the whole truth about a person's ability to pay.
Young customers of quick loan providers to get a clean slate faster?
A bad credit record can make getting a rental apartment, home insurance and a telephone subscription more difficult. Taking that into consideration, a bad credit record should not be created too lightly. After quick loans have become more common, the share of under 25-year-olds among those receiving their first bad credit record has increased and, according to a study by the National Research Institute of Legal Policy, they now form the majority. Based on the study it appears that for many, that first instance of a bad credit record is not followed by further ones later on.
As such, the duration of bad credit records caused by quick loans to young consumers should be evaluated and adopting faster expiration should be considered. The marketing and granting of quick loans has certain characteristics which are not in line with the principle of responsible lending and tend to result in more loan applications made on a whim. Young adults do not necessarily have experience of managing their own finances and a bad credit record may become an obstacle to getting a student loan or an apartment, which in turn may delay the start of independent life.
From the consumer's perspective it is important that a bad credit record doesn't have unreasonable consequences in terms of making life even more difficult. It is important to remember that a newly created bad credit record is not grounds for weakening the consumer's position in pre-existing credit relationships assuming that the consumer has not neglected his responsibilities with regards to them.