Disputed default listings

What is a default listing?

If a customer does not pay a phone or internet bill by 60 days after the due date, their provider can report their name and the details of the overdue account to a Credit Reporting Agency (CRA).

The CRA keeps information about the overdue account on file as a “default listing”. The default listing stays on file for 5 years even if the customer pays the account after it was listed, though the file should show that the customer did this.

If a consumer applies to a company for a loan or some other type of credit, the loan or credit provider can check whether they have a default listing on file. The credit provider may reject their application if there is a default listing on file in their name.

Default listings are also known as “credit defaults” and “credit listings”.

Complaints about default listings

The Telecommunications Industry Ombudsman (TIO) registers and investigates complaints about default listings.

Consumers may seek to have default listings removed for a number of reasons. Their complaints may involve claims that:

• their service provider did not notify them at all or adequately that they had an overdue account, or
• their service provider did not notify them that their account could be default-listed.
  
  

  I am the account holder, but my son uses the phone and said he’d pay the bills. My provider has my contact details but it did not contact me to tell me that my son wasn’t paying the bills. Now I have been default listed.

• they had disputed the charges or arranged with their service provider to pay the debt
  
  

  I rang my provider about my overdue account and we agreed that I would pay it off with a payment each fortnight over 20 weeks. After 6 payments, I rang my provider to say I would be a few days late with a payment. Now I have been default-listed.

• the service for the default-listed account was not their service
  
  

  I never took out a mobile service with this service provider and I was not living at the address that was on the contract.

   

• the account was default-listed before it was 60 days overdue
• the account was default-listed a long time after the due date, e.g. over a year afterwards
• the details of the default listing are incorrect, e.g. the amount that has been default-listed is different to the amount of the overdue account.

How the TIO investigates and assesses complaints about default listings

1. Complaints about inadequate/no notification that an account was overdue and/or could be default-listed

The TIO’s approach to complaints about notification issues

When we assess complaints about notification issues, we consider what a service provider did before it default-listed an overdue account.

During an investigation, we seek answers to the following questions:

• How did the provider advise the customer about an overdue account?
• Did the provider advise the customer that they could be default-listed if they did not pay an overdue account?
• How did the provider advise the customer that an overdue account could be default-listed?

We may decide that it would be fair for a service provider to organise for a default listing to be removed from a consumer’s credit file if we find that:

• a service provider did not advise a customer about an overdue account and/or that this account could be default-listed, or
• the way a service provider advised a customer about an overdue account and/or that this account could be default listed was inadequate.

To decide whether notification was adequate, we are guided by several factors.

1. The TIO’s position — we take into account our own position on what is fair and reasonable.

   It is our view that a service provider who intends to report an overdue account to a CRA must:

   • send the notice to the legal lessee of the service (the customer); not to the person who uses the service
     
     
   • give a reasonable period of notice to the customer that it intends to take this action
     
     
   • give the notice in writing, e.g. to the customer’s regular email address if they have told their provider that this is their preferred method of contact
     
     Note: our view is that it is not enough for a provider to rely on advice in the terms and conditions of a contract that it can report an overdue account to a CRA.
     
     

   • if there was a previous payment arrangement and the customer had made some payments, give the customer notice that it intends to report the remaining portion of an unpaid account to a CRA, and
     
     
   • if the customer had disputed the account, advise them how it proposes to finalise the dispute.
     
     
2. Regulations — we also take into account relevant regulations about notification of overdue accounts and default listings, especially the following:

The Credit Reporting Code of Conduct administered by the Privacy Commissioner	A credit provider may report an overdue payment to a credit reporting agency … if the credit provider has sent a written notice to the last known address which advises the individual of the overdue payment and requests payment of the amount outstanding (s2.7)
Explanatory Note to Credit Reporting Code of Conduct, Privacy Commissioner	Where an individual becomes overdue in respect of credit given by a credit provider the credit provider may not report the overdue payment to a credit reporting agency unless the credit provider has first notified the individual that the credit provider may lodge a report about the overdue payment against the individual with a credit reporting agency.
Telecommunications Consumer Protections Code, Chapter 7 - Credit Management Registered by Australian Communications & Media Authority (ACMA)	Clause 7.4.3 - A Supplier must advise Customers prior to taking Credit Management action, or at the appropriate time, of the general nature and effect of … (a) the time they have to pay for Services and (b) their obligation to pay by the due date. Clause 7.4.9 (e) (ii) — A Supplier must, prior to Disconnecting, make reasonable attempts to Inform* the Customer and any Guarantor … that default information may be used for internal purposes. *Inform means advise (a) in Writing; or (b) verbally and confirm and record to provide an auditable record. Clause 7.4.9 (e) (iv) (B) - A Supplier must, prior to Disconnecting, make reasonable attempts to Inform the Customer and any Guarantor in Writing that default inforation may be disclosed to external parties or a Credit Reporting Agency. 7.4.10 — A Supplier must (a) not take Credit Management action in relation to genuinely disputed amounts while the dispute is being investigated and remains unresolved by the Supplier, TIO or relevant recognised agency; and (b) must advise the Customer when it will commence any Credit Management action after the dispute has been determined.




2. Complaints about the timing of reporting of overdue accounts

   The TIO investigates complaints about the age of an overdue account when it was default-listed.

   Complaints about premature default listings

   A service provider cannot report a debt to a Credit Reporting Agency until it is more than 60 days overdue. This is the required time frame in the Credit Reporting Code of Conduct.

   Therefore, the TIO will ask a service provider to organise for a default listing to be removed from a consumer’s credit file if available information shows that an account was default listed less than 60 days after it was due.

   Complaints about delayed default listings

   It is the TIO’s view that an overdue account should not be default listed more than 1 year after the account due–date.

   A default listing can appear on an individual’s credit file several years after an original account becomes due. We have received complaints of overdue accounts being reported to a Credit Reporting Agency up to 6 years after an account became overdue.

Because applications for credit are likely to be rejected during the 5 years a default listing remains on file, the credit status of such consumers can be negatively affected up to 11 years after an account was due. In our view, it is not fair and reasonable for the effects of a debt to be prolonged in this way.

We have also formed this view after considering State and Territory laws which limit the time for taking legal action to recover debts. Limitations Acts or Limitations of Actions Acts in most parts of Australia requires providers to take legal action to recover debts within approximately 6 years. After that time a customer cannot legally be held liable for a debt.

Under the Credit Reporting Code of Conduct:

• an overdue account can be default-listed 60 days after it falls due, and
• a default listing must be removed 5 years after it is listed.

If an account is default-listed within 1 year of becoming overdue, then the default listing will expire within 6 years of the account becoming overdue. This correlates with the standard period of time a provider has to take legal action to recover a debt.

However, if an overdue account was default-listed more than 1 year after it was due, the default listing would stay on the customer’s credit file beyond the time that the debt can legally be pursued under the law of limitations.

For these reasons, we will ask a service provider to organise for a default listing to be removed from a consumer’s credit file if available information shows that it reported the account to a Credit Reporting Agency more than a year after it became overdue.

3. Multiple default listings for the same overdue account

   It is the TIO’s view that is not fair and reasonable to default-list an overdue account more than once, e.g. first by a service provider and then by the debt collection agency that bought the overdue account from the service provider.

   Because multiple default listings are usually reported at different times, they can prolong the negative effects of a debt on a consumer (see ‘Delayed default listings’ above).

   We will ask a service provider to organise for the second default listing to be removed from a consumer’s credit file if available information shows that an account was default listed more than once for the same account.
   
   

4. Default listing of accounts under $100

   It is the TIO’s view that a service provider should not report an overdue account to a Credit Reporting Agency if the amount that is overdue is less than $100.

   Credit providers are entitled to reject a credit application if a consumer has a default listing on their credit file, regardless of the amount of the original unpaid account. The default listing also remains on file for 5 years, regardless of the amount of the unpaid account.

   In our view, it is not fair and reasonable that a consumer’s ability to obtain credit should be affected for 5 years because a single debt of less than $100 has been default-listed. Reporting an overdue account to a CRA does not seem to be a proportionate action if the account is less than $100.

Our view has also been informed by other agencies’ policy and commentary on this issue:

Explanatory Note to Credit Reporting Code of Conduct, Privacy Commissioner	a record of a cheque for at least $100 which has been drawn by the individual and has been presented and dishonoured twice (Part 1 Credit Reporting Agencies - Credit information files – permitted contents)
A major Credit Reporting Agency’s current policy	A default occurs … where more than $100 is owed on [a credit] account.

5. Default listing of incorrect amounts

   Complainants dispute the amount that a service provider has reported to a Credit Reporting agency for different reasons. They may claim:

   • that the overdue amount was incorrect when their service provider first sent the bill to them, or
   • that they had an overdue account but the service provider reported the wrong amount as being overdue to the Credit Reporting Agency.

During an investigation, we consider all available information/evidence and seek answers to the following questions:

• Did the consumer dispute the charges at any stage? If so, how did the service provider respond to that dispute?
• Did the consumer dispute any aspect of the credit management process at any stage? If so, how did the service provider respond to that dispute?
• Did the consumer make any payments towards the debt that the service provider or its agent did not then deduct from the debt?
• Did the service provider report an incorrect amount to the Credit Reporting Agency? If so, how different was that amount from the amount that should have been reported to the CRA as being overdue?

Based on the available information we may decide that the service provider should organise either to:

• organise for the default listing to be removed from a consumer’s credit file, or to
• organise for the amount of the default listing to be amended.

Other factors we may take into account

In addition to the issues listed above, the TIO will also consider the following factors when investigating credit default complaints:

• the individual circumstances of the complaint
• the age of the complainant — the TIO’s position statement Services provided to minors may also apply.
• when the overdue account became subject to limitations law, i.e. when a service provider could no longer take legal action to recover the overdue account — the TIO’s position statement Old debts may also apply
• how the overdue account came about, i.e. was it for standard usage or was it for an unexpectedly high bill? — the TIO’s position statement Unlimited credit – financial overcommitment may also apply
• whether the consumer tried to pay the debt, i.e. did they make a payment arrangement? If so, did they follow the arrangement? — the TIO’s position statement Hardship and payment difficulties may also apply
• whether the debt is disputed
• whether the overdue account was paid after it was default-listed.
  

Created: 24 October 2007
Note: This position statement has replaced previous position statements, Notification of intention to report an unpaid account to a Credit Reporting Agency & Credit management of incorrectly calculated charges