Perfect borrowers pilloried twice as fraud suspects

James and Naomi Marshall are pillars of their community: regular churchgoers, and respected public servants. Yet they have been labelled as potential fraudsters by two big companies.

The first blot on their exemplary record came after the couple meticulously repaid a £5,000 home improvement loan from the Co-operative Bank. Not one instalment was late.

Later, they asked the credit reference agency, Experian, for their file before seeking a mortgage to purchase a buy-to-let property. To their 'surprise and shock' it was flagged with the warning 'suspected fraud', said Jim Marshall, a local authority social services officer.

The 'suspected fraud' warning was issued by the Co-op and shared by the 240 member-companies of the Credit Industry Fraud Avoidance System (Cifas).

A mistake had been made in the Marshalls' case. 'Apparently the date of our first loan repayment was mistakenly postponed by a month, and after completing three years of the five-year loan we discovered 36 late payments had been logged against us,' he says.

The couple's' solicitor contacted the bank, which admitted its error and apologised in writing. It paid their legal fees and had the warning removed.

Jim and Naomi, a deputy head teacher, from Richmond, south-west London, completed their purchase, and later bought a second buy-to-let home.

They hit trouble again a year ago when they applied for a loan from their main lender, the Cheltenham and Gloucester bank, part of the Lloyds TSB group, submitting with their application a list of their buy-to-let properties.

A week later the Marshalls were told by the C&G that their loan application had been rejected because of 'inadequate credit scoring'.

They shrugged this off until two months ago, when they again wanted to buy a rental property. This time, the Birmingham Midshires bank refused them a loan. And again, their credit score was too low.

This time the Marshalls' suspicions were aroused, and they again sent off for their Experian file.

To their chagrin, they found another 'suspected fraud' notice had been registered on it.

Their solicitor discovered that the C&G had issued the notice to the agency for 'concealment of borrowings'. Only when he threatened to take the bank to court did it launch an internal investigation, which found that the Marshalls' property list had been lost between their local branch and head office. The C&G admitted its error and withdrew the notice.

'We spent a lot of time and money, and lost at least one property because of these two Cifas notices,' says Jim.

'When you are turned down for an application, you are merely told it is because your credit rating is not good enough, not that you have something far more serious being held against you.'

Members of the public cannot get their credit files from the lender that has turned them down. They must go to Experian or rival Equifax.

'A lot of people don't know what is happening until it all goes pear-shaped,' says Experian's James Jones.

'Under the credit-scoring code of practice, lenders should tell people the main reason they are turning down a mortgage or some similar application. If the Cheltenham & Gloucester had told the Marshalls the crux of the reason for their refusal, they would have been able to follow it up and sort it out.'

Jack Pettigrew, a south- west London mortgage broker who has handled more than 500 applications in the past year, says: 'In their haste to win new business, many members of the Cifas scheme don't carry out proper investigations on individuals and issue flags as soon as they believe there is an element of doubt.

'Ironically, problems with applications often arise when people have a good record and nothing to hide, because they don't see any need to apply for their personal credit files.'

The Cheltenham & Gloucester says it is unable to discuss individual cases.

Get your file

If you have a query about a Cifas warning on your file, contact the agency at cifas@cifas.org.uk. To obtain a copy of your file send a cheque for ?2 to Experian Consumer Help Service, PO Box 8000, Nottingham NG1 5GX; or Equifax Consumer Response Centre, PO Box 3001, Glasgow G81 2DT.