Clydesdale Financial Services Limited · DRN-5724414

The complaint Miss C complains that Clydesdale Financial Services Limited trading as Barclays Partner Finance (‘BPF’) created a situation where her loan account was unfairly defaulted. Miss C also complains about how her account and her complaint was handled. Miss C wants an urgent amendment to her credit file, as she’s trying to get a mortgage, and further recognition of the distress and inconvenience she’s been caused. She’d like BPF to change their process. What happened Miss C was due to start repaying her loan agreement with BPF in April 2024 and contacted BPF to explain she was having financial difficulties. BPF placed a 30 day hold on Miss C’s account and said they’d send an income and expenditure form for Miss C to complete. An arrangement was set from 1 August 2024 but due to the level of arrears that had accumulated, Miss C’s account defaulted. Miss C complained about the process of reaching the arrangement and the default that had been reported to the Credit Reference Agencies. She outlined a catalogue of errors and asked BPF to put things right. BPF accepted there’d been delay in sending out the income and expenditure form and setting up an arrangement, and paid Miss C £130 compensation. However, BPF didn’t agree to remove the default which they said they were obliged to report. Miss C referred her complaint to the Financial Ombudsman Service and our investigator thought BPF had acted unfairly defaulting the account when they did. He thought Miss C should be put in the position she would have been in had the arrangement been set up in a timely manner. He recommended the default be removed, that BPF credit Miss C’s account with the amount she would have paid under the arrangement, and that BPF increase Miss C’s compensation to £250. BPF disagreed that the default should be removed and sought an ombudsman’s decision. Miss C thought more compensation was appropriate for the stress this matter was continuing to cause her. My provisional decision I recently issued my provisional findings, saying: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’ve taken into account any relevant law and regulations, the regulator’s rules, guidance and standards, codes of practice and (where appropriate) what is considered to have been good industry practice at the relevant time.

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I know this won’t be what Miss C was expecting, but I intend to reach a different conclusion to our investigator. I intend to say BPF should increase Miss C’s compensation to £250, but I’m not minded to ask that the default be removed. I’m sorry that this will be a disappointment to Miss C as removal of the default is her priority concern. I’ll explain how I’ve reached my provisional decision, and I’ll consider any further comments from the parties before making any final decision. I don’t need to make findings here about the delay sending an income and expenditure form, or the issues setting up the arrangement. I think BPF accept there’s been misadministration on their part as they’ve offered compensation. I’ll come back to this. First, I’ll focus on the impact of the arrangement on the default. The Information Commissioner’s Office (ICO) sets out recognised industry practice for the reporting of defaults in its document Principles for the Reporting of Arrears, Arrangements and Defaults at Credit Reference Agencies. This explains that as a general guide a default may be recorded to show the relationship has broken down between the creditor and debtor. This is expected when the debtor is three months in arrears, and will normally have happened by the time the debtor is six months in arrears. I’m inclined to say that the ICO has different expectations for recording a default when there’s an arrangement, depending on what’s agreed with the lender. The ICO says: “If, due to financial difficulty, your lender agrees a reduced or revised payment with you, this will be reflected on your credit file...It is important that you are made aware, when such an arrangement is made and maintained, that it will show on your credit file and that whilst arrears may accrue and increase a default will not be recorded.” But the ICO also says: “…If your lender does not agree a reduced or revised payment with you because the amount you offer to the lender is not acceptable, for example, a very low or token payment, the account will not be reported as an arrangement or a DMP negotiated by a third party. Any payments you make will be reflected in the current balance, arrears will continue to accrue and a default may be recorded.” I’m minded to say BPF were clear on the phone to Miss C that a repayment plan of less than the monthly instalment would lead to further arrears. BPF said Miss C would need to pay the full arrears after three months or come to an arrangement to pay her monthly instalment plus a portion of her arrears each month. I’m minded to say both options would prevent the arrears increasing past the typical default level. A long term plan was mentioned as an option to pay less than the monthly instalment, but BPF said that would impact Miss C’s credit file significantly as she’d be paying less than was required. Miss C said, “I’ll just have to take that hit for the time being.” BPF reiterated that such a plan would have a credit file impact that could affect Miss C’s upcoming mortgage application, and that any forbearance plan will have a significant detriment to her credit file.

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Miss C arranged to pay £240 a month towards her loan – significantly less than the monthly instalment - and this plan was set up on 1 August 2024. By that point Miss C had received a notice of sums in arrears and a letter warning her a default notice would be sent. I can understand why Miss C was upset with the wording of these letters, as they suggested they’d not have been sent if a suitable plan was already in place. When Miss C called BPF about this BPF said, “we have to send out regulatory letters…these letters would still go out if we had a plan…at some point even with a plan in place a default may still be registered because the account is in arrears.” Miss C asked how to avoid a default whilst the process of putting a plan in place was ongoing. BPF said the default notice would give 30 days for payment or for a plan to be put in place – but Miss C would need to be paying what was due every month. In the circumstances I’m minded to say BPF were clear that Miss C needed to be making higher payments to avoid her account defaulting. I’m not persuaded this was possible for Miss C given she’d contacted BPF for forbearance and she’d submitted an income and expenditure form detailing what she could afford, alongside paying her other creditors. If Miss C’s arrangement had been set up earlier, I’m not minded to say this would have avoided a default. That’s because Miss C’s payments would still lead to arrears on her account and at a certain point the ICO would expect BPF to register a default. If I were to put Miss C in the position she’d have been in without the delays, Miss C would need to pay a lump sum to BPF for the months of the plan she missed. A quick calculation tells me that if I were to direct BPF to adjust Miss C’s account to account for an earlier plan the default would still occur, it’d just be entered later than it was. I’m not minded to say that’s helpful to Miss C in these circumstances, and I propose to leave the default as it is. I know Miss C will find this of little consolation, but this does mean the default comes off her credit file sooner. I think this is beneficial as, for the reasons I’ve explained, I am inclined to say it’s highly unlikely Miss C would have avoided a default. Having listened to all the calls and considered the impact this matter has had on Miss C, I’m minded to agree with our investigator that BPF’s compensation of £130 didn’t fairly reflect Miss C’s overall distress and inconvenience. I propose any compensation should recognise Miss C’s frustrations and time dealing with the arrangement, rather than the upset caused by the default which I’m minded to say was correctly applied. It’s clear there were calls that ought not have been necessary. I also consider it was upsetting for Miss C to reach out to BPF because she had a debt she was struggling to pay only to have to make constant efforts to move things forward. I am minded to say Miss C was put to far more trouble than I’d expect for what should have been a simple process. In these circumstances I intend to say £250 in total is a fair sum to reflect Miss C’s distress and inconvenience. I think this is in keeping with the guidelines the Financial Ombudsman Service follows when making awards of this nature. Miss C raised concerns about BPF’s complaint handling, which unfortunately has compounded her unhappiness. I don’t dismiss Miss C’s concerns but I am limited in what I can consider in my role as an ombudsman and unfortunately my remit doesn’t extend to a firm’s complaints handling. Nor does it extend to new complaints that BPF haven’t yet had a chance to answer – such as the issue Miss C has raised about BPF’s text notifications.

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Miss C also wanted BPF to make some changes to their process of setting up an arrangement to help future customers. I’m not able to direct BPF to change their processes as this for BPF to decide and, ultimately, a consideration for the Financial Conduct Authority as their regulator. However I hope BPF take into consideration what’s happened here, to better serve their customers.” Responses to my provisional decision BPF accepted my provisional findings. Miss C cited the ICO’s guidance and submitted that as her arrangement was agreed and kept to, a default should not have been registered. Miss C sent a copy of her default notice and indicated she’d taken remedial action before the date required, although BPF had messed her around with the payment dates. Miss C also refuted that BPF had done enough to adequately inform her that a reduced payment plan would lead to a default. She said the warnings were not explicit enough and did not differentiate between the type of credit file impact she was being exposed to. Miss C said she was expecting missed payments or arrangement markers, not a default. Miss C also felt her account continued to be mismanaged and she was unhappy with further correspondence she’d received. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I have taken into account the submissions made in response to my provisional decision and I thank Miss C for the clear and concise way she has presented her arguments. I’m aware Miss C’s unhappy with how her account’s subsequently been managed by BPF and I am sorry to hear this. Unfortunately this isn’t something I can consider as it’s arisen after the matters leading to this complaint. If Miss C raises a separate complaint with BPF this may be something the Financial Ombudsman Service can consider in future. I have considered the points Miss C’s raised in relation to her original complaint, but I’m not persuaded to depart from my provisional decision. I’ll explain why. I note Miss C relies on the following guidance from the ICO: “A default should not be filed: - If jointly with the lender an agreement is reached for an arrangement and you keep to the terms of that arrangement.” “If your lender agrees to give you a temporary arrangement, but you fail to make the agreed payment against the new terms, they may still file a default as soon as a payment is missed, as long as you were at least 3 months in arrears on the original agreement.” “If an arrangement is agreed… a default would not normally be registered unless the terms of that arrangement are broken.” I don’t disagree that this is part of the ICO’s guidance but think this must be read in the context of the full guidance and the wider circumstances. I’ve also considered the following, from the same guidance:

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“Depending on the period and amount of the arrangement, arrears may continue to be reported. Such temporary arrangements may last for some time but are generally expected to revert to the contracted terms at some future point. For such accounts arrears may continue to be calculated in accordance with the contracted terms.” “Generally, by the time the account is at least three months in arrears the lender may be taking further action such as reporting the account as defaulted.” I’ve noted the ICO’s emphasis on temporary arrangements that bridge a short gap while someone gets back on track with their contractual obligations. While the ICO acknowledges that temporary arrangements may lead to some arrears, I don’t think the ICO expects arrears to accrue beyond the three-to-six-month level without a default status being registered or the parties permanently revising the terms of the agreement (such as recapitalising). I say this because the ICO expects data on a credit file to be fair, accurate, consistent, complete and up to date. I think the benchmark of three to six months of arrears is there to provide consistency in reporting so that default status information indicates the level of difficulty a person’s had with an account. This level of arrears will typically coincide with a lender taking further action on an account which may require a default notice to be issued under the Consumer Credit Act 1974. I don’t consider there’s anything in the ICO’s guidance that prohibits BPF from acting in accordance with their legal rights and regulatory responsibilities. If an account defaults following non- compliance with a default notice, I’d expect this to be registered with the CRAs. I agree BPF needed to communicate what they intended to report to Miss C’s credit file. The ICO would expect consumers to be made aware if their agreed payment plan would prevent a default from being registered – so I’d expect a lender to be clear when a default would be registered. I know Miss C refutes this but think BPF communicated fairly in this respect. I referred in my provisional decision to a phone call between the parties where BPF said paying less than the monthly instalment was an option on a long-term plan, but this would have a significant credit file impact. Miss C said in response to my provisional decision that the impact wasn’t clear enough. But I’ve noted from the letter Miss C’s sent me about her payment plan that BPF said: “…as you are on a reduced monthly payment plan, we will continue to report that your account is in arrears and may register a default.” I think that was a fair position for BPF to take – and communicate – because the arrears were going to increase. I don’t think was incompatible with the ICO’s guidance for BPF to accept payments and take steps to register a default Miss C’s account at the same time, given the repayments Miss C was able to make. I understand Miss C’s strength of feeling on this matter, but I think it would have been unfair for BPF to report arrangement markers for a year while the account was deteriorating. I think this would go against the grain of BPF’s reporting obligations and would likely have led to a prolonged negative credit file impact for Miss C. I say this because arrangement markers would likely stay on Miss C’s credit file longer than the default, which would be removed six years after the default date. Miss C’s referred to her default notice and said she took remedial action before the deadline. However the remedial action required by the default notice was the clearance of the full

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arrears. Miss C wasn’t offering to do this before the deadline, and her payment proposal would only lead to further arrears accruing. As I set out in my provisional decision, even if BPF had acted quicker to set up a payment plan with Miss C I don’t think this would have avoided a default, only delayed it. And for the reasons I’ve given I don’t think it’s beneficial for Miss C’s default to be entered later than it was. In these circumstances I think it was fair for BPF to take steps to register a default when they did, so as not to prolong the negative impact on Miss C’s credit file. I’m not going to ask that this is removed as it fairly reflects that Miss C’s arrears reached default status level and, ultimately, she didn’t satisfy the terms of her default notice. I still think Miss C was caused more trouble than I’d expect making the payment plan. So I maintain that BPF should pay £250 in total to recognise Miss C’s distress and inconvenience. Putting things right Clydesdale Financial Services Limited trading as Barclays Partner Finance must pay Miss C £250 in total for her distress and inconvenience. Given Miss C’s received £130, a further £120 should now be paid. My final decision For the reasons I’ve outlined, my final decision is that Clydesdale Financial Services Limited trading as Barclays Partner Finance must put things right, as I’ve set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss C to accept or reject my decision before 2 September 2025. Clare Burgess-Cade Ombudsman

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