Consumer queries: Why have I been refused a car loan?

A reader called Sinéad contacted us in a state of agitation after being refused a car loan of €10,000. “I am furious,” she writes. “I have been with my bank for more than 20 years and have my wages paid into it and earn enough to be able to cover the repayments, which would be €400 a month.”

When she got on to us she had yet to contact the bank and so was uncertain why the loan application was rejected. “Do you know what grounds they could have for rejecting my loan?” she wonders.

It is hard to say, not least because we do not have access to our reader’s account details or financial circumstances. What is easier to say is that when the crash came, the banks all but completely stopped lending money, and although the economic situation has improved in recent times, the hangover has not yet lifted for the financial institutions.

When a person applies for a loan, a lender typically asks for income, employment status, living costs and existing borrowings in order to assess whether or not they are a desirable candidate. But the checks do not stop there. All lenders delve deeper into your financial past through background credit checks. When Sinéad signed the form she would have given her bank permission to access information about her credit history.

If she has ever blotted her copybook, for example by forgetting to pay off a credit card on time, missing a payment on a personal loan or falling behind on a mortgage payment even once, it will have seriously damaged her chances of getting a loan.

Lenders rely on the Irish Credit Bureau as their primary source of working out whether a loan applicant is a good risk. More than 80 lenders send information about borrowers and their loan repayments to the ICB, which holds an individual credit report for each borrower on its database. These reports have details of all loans and leasing and hire-purchase agreements a person has, the repayments made or missed and any legal action taken by the lender against that person. Credit card details are there, too.

The ICB also gives a credit bureau score for the would-be borrower. The higher the score, the more likely it is the borrower will stick to agreed repayments. Blemishes on a person’s record take five years to disappear.

We can't help Sinéad have the car loan decision reversed, but we would urge her to find out what the banks know. She can check her credit report with the ICB for just €6. You can download an application form on icb.ie, or call 01-2600388 to request one by post, and submit it with a postal order or bank draft.

When she gets the report, she will need to keep an eye out for mistakes – either hers or a lender's. She may have completed a direct debit form incorrectly and missed a loan repayment due date, or her lender might have granted her a moratorium on a loan for a period but then forgotten to indicate this on the report sent to the ICB. Lenders generally act swiftly to correct any mistakes, but if they fail to resolve a situation you should refer to matter to the Office of the Data Protection Commissioner (dataprotection. ie).

Tesco: the direct debit that didn’t work

A reader called Kieran has been waiting 10 months for Tesco Bank to set up a direct debit to pay his Tesco Visa card. “They received my mandate on March 3rd, 2015, and for the first few months it was rejected every month by my bank. Tesco couldn’t explain why and requested each time that I make a manual payment instead, which I did,” he says.

He contacted his bank in July, which explained that Tesco had not set up his direct debit correctly. “They provided clear instructions on how to do this, which I forwarded to Tesco Bank’s complaints department, but they claimed they were unable to amend my direct debit. They suggested cancelling it, waiting a month and setting up a new direct debit. I asked my bank about this and they confirmed that this would not work. The direct debit must be amended as instructed.”

His bank attempted to contact Tesco on his behalf but received no reply. “I then made a complaint to the Financial Ombudsman, who offered to mediate between myself and Tesco, but Tesco refused. I have now stopped using the card and I have refused to make any more manual payments until they sort this out, but they are now threatening me with legal action. My credit rating has also been affected. All I want is a direct debit.”

We contacted Tesco and received the following statement. “We are co-operating fully with the Financial Services Ombudsman and await the findings of their investigation.”