In the US, consumers can freeze their credit worthiness records and receive a code. When the records are frozen, the only orgs that can access the records are those already doing business with the consumer. If a consumer wants to open up a new account, they share the code with the prospective creditor who uses it to see the credit report.
So the question is, how are access controls on credit histories done in various EU nations? Do any use unlock codes like the US, or is it all trust based?
I’m many EU countries there is a state-run Credit Bureau of sorts that keeps track of each citizen’s debt.
The debt data is only available to banks and usually reduced only to the answer to the question “can this person be allowed to take on this credit”. So not what their running debt is but only whether they can take on a new, specific one.
The rules for determining that vary from state to state but generally it’s related to the person’s income and not allowing their credit payments to drop that income below what’s considered viable. Some states may use a percentage on top of that.
For context, most people in EU do not usually use credit in day to day life, only debit.
They tend to resort to credit for large purchases, the most common being a house/apartment or a car. Some stores may offer the ability to resort to credit for things like home appliances (refrigerators, AC, washing machines/driers etc.) that can put a strain on a person’s finances. Some may even offer it for more trivial purchases. These deals go through a bank as well and become a rate that you have to repay monthly. It is not related to a credit card.
There are other types of credit that are related to cards and resemble what you are familiar with in the US — ability to spend above the money you actually have and some perks on top of that. But they still work like a regular credit, they are done by banks, they are recorded at the Credit Bureau, they count towards your total indebted ability etc.
In the US people also use credit card purchases add a form of shopper assurance. In the EU this is done by the state. The entire EU has strong consumer rights in the law and there are state run national and regional consumer bureaus that will take complaints, investigate and fine the company. The law is very consumer friendly and puts the burden of responsibility on the company/bank in the case of unauthorized/unproven purchases.
You can reverse payments through the bank in the EU as well but it’s seldom necessary, since the companies tend to revert the charge willingly when confronted by the consumer protection bureaus.
I’ve only had to resort to bank reverse a couple if times.
One was when I ordered a pair of shoes of what appeared to be an Italian website. It later turned out it was a scam site that listed popular models that were not made anymore and then sent you a ridiculously poorly made knock-off copy from China. I explained the issue to my bank and showed the knockoffs I got and a week or so later the charge was reversed.
The second was while vacationing in another EU country, I started getting the same amount withdrawn (about €50) from the card each day by an entity in the country I was visiting. No idea if it was a scam or some sort of automated payment gone wrong. I blocked the card and contested the charges and they were reversed.
So not what their running debt is but only whether they can take on a new, specific one.
I knew the criteria was out of the hands of EU-based lenders, but didn’t realise the data is also out of reach to the lender. I suppose it makes sense that the lender would get no info other than a yes or no, if lenders have no discretion.
I noticed A shop had a rediculously priced phone (like €800+, something I would never buy) but advertised something like €9 if you take a contract. So it’s effectively a loan factored into a locked-in phone service plan. IIUC, the phone shop must arrange that with a bank and does not have the option of taking on risk, and then the bank asks the central bank if customer X can handle that loan, correct?
You can reverse payments through the bank in the EU as well but it’s seldom necessary, since the companies tend to revert the charge willingly when confronted by the consumer protection bureaus.
I’ve only had to resort to bank reverse a couple if times.
One was when I ordered a pair of shoes of what appeared to be an Italian website. It later turned out it was a scam site that listed popular models that were not made anymore and then sent you a ridiculously poorly made knock-off copy from China. I explained the issue to my bank and showed the knockoffs I got and a week or so later the charge was reversed.
That’s quite a surprise. I heard SWIFT/IBAN transfers were permanent and irreversable. I heard of mistakes being corrected but it required the two banks to collude and the bank of the recipient to do a money grab on their account, which I suppose would be impossible if a criminal closes their account. I wonder if your bank took a loss or if they colluded with the other bank. IIRC, banks have a minimum “investigation” fee of like €25 plus an hourly rate to pay bankers to deal with bad transactions. Did your bank offer that service for free?
the phone shop must arrange that with a bank and does not have the option of taking on risk
That’s correct, any and all loans go through a bank. But please note that the bank won’t advise if it’s a bad loan, for example a ridiculously overpriced phone and/or phone plan. They just check if you can afford the monthly payment.
I heard SWIFT/IBAN transfers were permanent
These were card payments not transfers. Any payment done with a card, whether online or at a POS machine, can be reversed. And yes it was done for free in both cases.
Debit card payments are typically SEPA direct debit
Direct debit transactions are done by companies not by the customer. They’re used for allowing utility companies to pull the monthly bill automatically from the subscriber’s account.
Someone who knows better please correct me, but I don’t think there is such thing as a credit score in the UK (not EU now I know, sadly). I don’t think there is one in the Netherlands either.
I don’t mean to imply anything about scoring, but certainly there must be some kind of mechanism to expose bad debtors to lenders.
In Belgium, there are no private credit bureaus but there is a central bank. Belgian banks are obligated to report loan defaults and cash transactions to the central bank, and creditors are obligated to check the central bank’s records. Consumers have no way to control creditors access to their records in the central bank. It seems to be trust based. The central bank apparently trusts that a creditor is checking a consumer’s file in connection with an application for credit by the consumer.
There’s definitely the bureau kredietregistratie in the Netherlands.
As far as I know you can’t “freeze” it like you describe, though you can request information on what is stored about you and who accessed it. It also costs money to run a check, and credit history doesn’t go back more than five years, doesn’t include your mortgage unless you missed paying that for longer than three months, and doesn’t include debts less than €250.
Edit: also just checked, but the information is only shared with parties that share credit history with the BKR. I think that means that it’s basically frozen by default, i.e. only parties that are actually about to do business with you can access it, but I’m not entirely sure. They’ll at least have to do some kind of business, i.e. not be a generic data broker.
Over here it’s not necessary for a person to restrict access because access to the credit records is restricted to banks, allowed only when a bank is asked by you explicitly for a credit, and all loans must be done only by banks. So it’s basically impossible for anybody to access it outside very specific circumstances initiated by you.
pretty sure that having “credit agencies” keeping track of people credit history is a huge violation of GDPR and would be illegal in the EU. At least I never heard about that. The only similar things I know is the central bank keeping a listing of “unpaid credit” which make ban you from getting any new credit for a certain time. (And as it’s a public institution, you have the right to contest any writing there in court if it 's not justified, stuff like identity theft being a classic one)
You’re wrong unfortunately, private credit agencies are a thing.
In Germany, you might be denied an apartment if the landlord demands a Schufa score
Interesting, I always thought the Schufa was a government service. But isn’t it way lighter than the US “rating” ?
keeping track of people credit history is a huge violation of GDPR and would be illegal in the EU
it is not precisely answering the question, but here in czechia, debt collecting is a private and pretty shady business. there is centralized database of these debts and literally anyone can check literally anyone else in the database, provided you know the person’s equivalent of social security number, at any post office.
that is not the debt from credit cards as americans understand it, but debt where you had to pay something and didn’t, maybe you got behind on your rent or w/e, and the court confirmed the debt and allowed it to go to private debt collecting.
The only similar things I know is the central bank keeping a listing of “unpaid credit” which make ban you from getting any new credit for a certain time.
Indeed that’s what I’m talking about. In Belgium it seems consumers have no control over whether a creditor can access the central bank’s records. Apparently the central bank simply trusts that creditors are checking records in response to an application for credit. I would like to know if any EU countries make use of an access code so consumers can control which creditors can see their records.
In the Netherlands, you need to give permission for someone to check yours, and only credit-providers are allowed to check. I can’t look at my neighbor’s credit data.