Guilt by association in credit records: New rules limit but fail to stop the supply of third-party data linked to loan applicants. Andrew Bibby reports

THERE is a Marks & Spencer chargecard holder somewhere in Kingston-upon-Thames who may be surprised to know that details of his or her credit limit and account number have recently been supplied to John Lamidey, assistant to the Data Protection Registrar in Wilmslow, Cheshire.

Mr Lamidey, who monitors the use made of data by credit reference agencies, obtained the information by exercising his legal right as an ordinary individual to be sent details of his credit files. As a result of giving his old address in Kingston, he was also supplied by one agency with financial details of the latest residents there. 'I have a lot of information about people I haven't met, who live in a house I haven't been at for over seven years,' he said.

The supply of 'third-party' information by credit reference agencies to their clients has attracted much criticism, and not only on grounds of confidentiality. Some people have been handicapped in their attempts to obtain loans by the poor credit records of strangers who used to live in their house or who reside at a similar address.

From the end of next month, however, credit reference agencies will have to stop supplying much of this third-party data. After a lengthy legal tussle between the Data Protection Registrar and the four principal agencies, a tribunal ruled last year that agencies will normally only be able to give financial information about other people if they are, or have been, members of the same family.

The judgment was a partial defeat for the Registrar's original plan to prohibit all third- party information. 'It's a compromise and both sides have won and lost,' said John Saunders, joint managing director of one of the largest agencies, CCN.

The new rules will permit the agencies to continue supplying information about other people with the same surnames who are living, or have lived, with the person under consideration. Details about people with different surnames may also be provided if an agency has evidence they have been living in the same household.

The new regulations may still leave scope for public dissatisfaction. 'A typical example could be of middle-aged parents with a grown-up son who goes to college, where he opens a credit account giving his home address and then defaults,' said Mr Lamidey. A County Court judgment against the son would be held on file for six years, perhaps damaging the parents' credit rating during this time.

As the rules apply to previous as well as present living arrangements, separated or divorced couples may find they remain tied together in the eyes of the credit reference agencies. Residents in multi-occupancy houses (or in a series of homes with the same post office address) will also have to be on guard. If two tenants happen to share a surname, the agencies will treat them as living in one household: John Smith's creditworthiness will continue to be damaged by spendthrift Jane Smith living in the flat upstairs.

The remedy in these situations is to contact the agencies in writing, telling them there is no financial connection between yourself and another named person. Agencies call these letters 'notices of dissociation', and after 31 July, they will have to amend the records they supply to clients accordingly. (The existence in force of a notice of dissociation will not be notified to lenders.)

Agencies are anxious about possible new opportunities for fraud and say they will be checking carefully to ensure notices of dissociation are genuine. 'You can't dissociate, saying you're financially independent, if you are sharing income or sharing credit commitments,' Mr Saunders said.

Although the agencies say they will be exchanging the dissociation details they receive with each other, it is prudent to contact all four companies separately. Notices of dissociation may be sent in advance of the July deadline.

However, the new rules apply only to financial information and not to electoral roll details. This means that even if a notice of dissociation is in force, the agencies will continue to supply credit enquirers with the names of all the people shown on electoral registers as living at a particular address.

Credit reference agencies' addresses: CCN Systems, Consumer Affairs Department, PO Box 40, Nottingham NG7 2SS; Infolink, CCA Department, 38 Whitworth Street, Manchester M60 1QH; Equifax Europe (UK), Consumer Affairs Department, Spectrum House, 1a North Avenue, Clydebank, Glasgow G81 2DR; CDMS, CCA Department, Dove Mill, Dean Church Lane, Bolton BL3 4ET.

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