Credit where it’s due
Credit Rating Agency Equifax were dealt a heavy blow in the High Court when their failure to update the information held in their credit file meant Mr Smeaton was denied a loan. The Court found that Equifax had breached the Claimant’s statutory duty of care under the Data Protection Act and was entitled to be compensated for his loss and damage.
Mr Smeaton had been made bankrupt in March 2001. Equifax had obtained details of the bankruptcy order from the London Gazette and updated its file to include the bankruptcy. It transpired that the bankruptcy order had been obtained by an abuse of the Court process and Mr Smeaton was able to firstly stay the bankruptcy order shortly after it was made and finally have it rescinded in May 2002. However, Mr Smeaton’s credit report inaccurately recorded him as being bankrupt for more than five years.
At that time, Equifax were not automatically notified when bankruptcy orders were stayed or rescinded. Mr Smeaton would have been required to either publish a notice in the London Gazette or contact Equifax directly to update them. As he was not aware he was required to do so, he did not.
In 2006, Mr Smeaton applied for a bank loan via his company, Ability Records Limited. As he was still (incorrectly) identified as being subject to a bankruptcy order, the loan was refused and Mr Smeaton was unable to obtain alternative funding. Mr Smeaton issued Court proceedings against Equifax.
Equifax admitted that it had not considered whether it should treat differently those whose bankruptcy orders had run their full course and then been discharged from those whose bankruptcy had been prematurely ended by rescission, annulment or a stay.
The Court held that Equifax had failed to show that it had taken reasonable steps to ensure the accuracy of its data and was therefore in breach of its duty. Equifax had not adequately assessed the risk of rescinded bankruptcy orders not coming to their attention and individuals not being aware of the need to inform them directly.
In this case, the refusal for the loan had been as a direct result of the bank being provided with the inaccurate entry on Mr Smeaton’s credit file. Section 13 Data Protection Act 1998 provides that where an individual suffers damage or distress by reason of a contravention of the provisions of the Act, they are entitled to be compensated for that damage.
Mr Smeaton claimed substantial losses including loss of profits and distress. The trial was limited to the issue of liability and damages for the losses will be assessed at a later date.
Partner and Head of Dispute Resolution
Commercial Dispute Resolution
LPatel@LawBlacks.com
0113 227 9316
@LukeLawBlacks
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