Abdul Muhammed Law Practice
Abdul Muhammed Law Practice writes about debtors and credit reporting in Nigeria.
Introduction
Debt collection is an integral practice in the work of banks and other lenders in the Nigerian financial industry as banks and other lenders are always seeking to recover funds owed by borrowers who have defaulted on their obligations.
While debt collection is a legitimate pursuit, it can have a significant impact on the debtor’s credit report.
This article explores the relationship between debt collection activities and credit reports in Nigeria and outlines the rights of debtors to dispute inaccuracies.
Link between debt collection and credit reports
Credit reports play a crucial role in lending decisions of banks and other financial institutions and in respect of financial and investment transactions.
These reports, often maintained by credit bureaus, contain information about an individual’s credit history, including their borrowing and repayment habits.
When a debtor defaults on a loan or credit card payment, the lender may take various debt collection actions, and these actions can affect the debtor’s credit report in several ways.
Late payments
If a debtor makes late payments on a loan or credit card, it can negatively impact their credit score. Lenders often report late payments to credit bureaus, and these reports can remain on the credit report for several years.
Default
When a debtor fails to make payments for an extended period, the lender may declare the debt as a write-off.
A write-off is a notation on the credit report indicating that the lender does not expect to recover the full amount.
This significantly harms the debtor’s credit score.
Collection accounts
Lenders may also transfer delinquent accounts to third-party debt collectors.
When this happens, the collection account may appear on the debtor’s credit report as a separate negative entry, further damaging their credit.
Legal action
If the debt remains unpaid, the lender may take legal action, resulting in judgments and court orders.
These legal actions are reflected on the credit report and can have a severe adverse impact on the debtor’s creditworthiness.
Disputing inaccuracies
Debtors in Nigeria have rights and remedies to dispute inaccuracies on their credit reports, ensuring that their credit histories accurately reflect their financial behaviors.
Access to credit reports
Debtors have the right to access their credit reports from credit bureaus upon request.
This access allows them to review the information contained in their reports and identify any discrepancies.
Disputing inaccuracies
If a debtor finds inaccuracies, such as incorrect late payment notations or debts that they believe have been paid off, they can dispute these inaccuracies with the credit bureau. The bureau is required to investigate the dispute within a specified period, usually 30 days.
Provide documentation
Debtors should gather any supporting documentation, such as payment receipts or loan settlement letters, to substantiate their dispute. This documentation can be crucial in rectifying inaccuracies.
Right to correct information
If the credit bureau finds errors in the credit report, they must correct them and provide an updated report to the debtor. This correction process can improve the debtor’s credit score.
Legal remedies
In cases where the credit bureau fails to address inaccuracies or resolve disputes, debtors have the right to seek legal remedies to rectify their credit reports. Legal action may be necessary to compel corrections.
Conclusion
Debt collection activities by banks and other lenders can have a lasting impact on a debtor’s credit report and financial well-being.
It is essential for debtors in Nigeria to understand their rights regarding credit reports and their ability to dispute inaccuracies.
By staying informed and taking proactive steps to correct errors, debtors can protect their creditworthiness and financial futures, ensuring fair and accurate reporting in the credit ecosystem.
Moreover, lenders and credit bureaus must adhere to regulatory guidelines and ensure the accuracy of the information they report, promoting transparency and fairness in debt collection practices.
READ: 20 rights of a bank customer in Nigeria
