Who’s watching you?

Dec 09, 2010

By Susan Irwin, Executive Director / Lawyer, Rural Legal Services

It is indeed the information age. Information about you is being collected, sorted and stored by numerous governmental and private organizations. Perhaps there isn’t much we can do about the information collected as a result of our use of public services, but in our role as consumers we should at least be aware of the information that is being collected in our credit record, how it is being used, and our rights under Ontario’s consumer laws.

For most of us, the reality of the information collected strikes home whenever we apply for a credit card, loan or mortgage. The lender will ask to run a “credit check” to see what the “credit bureau” has on file. The credit bureau, or consumer reporting agency, is simply a private organization that receives and stores information about individuals, including information from credit card companies, and other businesses that deal with consumers. They also keep track of certain types of legal proceedings, such as bankruptcies.

The report from the credit reporting agency will paint a very detailed picture of your use of credit. Besides the particulars of whom you owe money to, and whether you have repaid past loans and bills on time, the reporting agencies also give out a credit score: the higher your score, the better your “credit rating”. Although not necessarily the sole reason for granting or refusing credit, your credit rating is certainly a factor that can influence the terms of the deal, including the interest rate or the requirement for a co-signor or guarantor.

What many consumers may not realize is that their credit score can also be used by insurance companies to help assess risk and determine the cost of premiums for home insurance. You may never have missed a premium payment, or even made a claim, but some insurers may ask you to agree to a credit check as a condition of granting coverage. If you decline, you may find that your insurer is no longer able to offer you the most competitive rate.

There are many reasons why a person may have a less than stellar credit rating. It is difficult to see however, why being late on a car loan payment after being laid off makes you a greater risk for a claim under a homeowner’s policy. Some people have also found that their insurance rates have jumped dramatically at renewal time because their credit rating has changed.

The negative impact that this practice can have on consumers has recently been noted by the Insurance Brokers Association of Ontario. It has urged the government of Ontario to ban the practice of using credit scoring in the underwriting of home and personal property insurance. The use of credit scoring in relation to auto insurance policies was banned in Ontario in 2005.

Your credit record and score is not public information - your neighbour or your future in-laws do not have the right to ask a credit reporting agency for a report about you to satisfy their curiosity. You should be aware, though, that you routinely consent to credit checks as part of many normal consumer transactions, and this may or may not be brought to your attention when you sign the contract or application. Outright refusal to permit a credit check usually means you won’t get the apartment, the new car, or perhaps the insurance policy or even the job (some potential employers will ask job candidates to consent to a credit check). However, you shouldn’t be afraid to ask why a credit check is required, and who will get to see the report.

Most importantly, you should be aware of the details of the information collected about you by the credit reporting agencies. You have a legal right to both see the information that has been collected about you and to demand the correction of any inaccuracies. The consumer reporting agencies are governed under the Consumer Reporting Act, administered by the Ontario Ministry of Consumer Services. The two major consumer reporting agencies licenced under the Act in Ontario are Equifax Canada Inc. and Trans Union of Canada. Consumers are entitled to a free report, although a fee is usually required if you also want your credit score.

So remember, as we head into this holiday season, it’s not just Santa who is watching to see whether you’ve been naughty or nice! We can’t help you with Santa, but if you are having a problem with a consumer reporting agency, or almost any other consumer law matter, don’t hesitate to give us a call. We may be able to provide the help you need, or refer you to another source of information or assistance.

Legalese is a column of general information and opinion on legal topics by the lawyers of Rural Legal Services, Box 359, Sharbot Lake, ON, K0H2P0, 613-279-3252, or 1-888-777-8916. This column is not intended to provide legal advice. You should contact a lawyer to determine your legal rights and obligations.