Topic 11 - Checking the Applicant's Credit Status

Question 1

Which information is not revealed by references and statements?

Answer 1

• Pending court hearings
• Purely cash transactions
• Action for maintenance/child support claims
• Borrowings yet to be drawn down

Question 2

A credit record shows records of defaults for how long?

Answer 2

Six years from the date of the default notice, even if arrears are paid off.

Question 3

What issues can render a guarantee invalid?

Answer 3

• Lack of capacity to contract
• Undue influence
• Misrepresentation
• Misapprehension
• Mistake

Duress

Question 4

Payday loans may affect a lender’s attitude towards agreeing to a mortgage. True or False?

Answer 4

True. But they will not always show up in credit searches.

Question 5

Insolvency:

Answer 5

When a person’s liabilities exceed their assets, or they cannot meet their financial obligations when they fall due.

Question 6

CCJs:

Answer 6

Listed on the Register of Judgements, Orders and Fines for England and Wales. They stay on the register for 6 years, unless they are paid in full within a month of the judgement.

Question 7

DROs:

Answer 7

Debt relief orders are intended to help those living in England and Wales who are struggling to pay their debts and who:

• Owe a maximum of £20,000;
• Have total gross assets not exceeding £1,000 plus a car worth less than £1,000;
• Have disposable monthly income of no more than £50

They are unlikely to be in a position to take out a mortgage

Question 8

Acceptable forms of identification:

Answer 8

• Current passport
• Driving license with photo
• Entry on electoral roll
• Recent utility bill or council tax bill in the customer’s name
• A letter or statement from a person of responsibility may be accepted for those who are financially excluded.

Question 9

Record-keeping for money-laundering prevention:

Answer 9

Evidence of identification and of transactions must be retained for at least 5 years.

Question 10

Form J restriction

Answer 10

Filed by a trustee in bankruptcy. It requires the Land Registry to note the trustee’s interest in the property and notify them of any dealings related to it.

Question 11

What is default and what happens because if it:

Answer 11

Where the borrower missed one or more payments, and did not respond satisfactorily to requests to correct the problem
The lender can issue a notice of default to the borrower
The credit record shows the default for six years from the date of the default notice, even if the arrears are paid off
The record will show the amount of the original default and the balance at the date of the report, including any payments made since default

Question 12

What specific factors might a credit score include?

Answer 12

„ age;
„ income;
„ occupation;
„ existing commitments;
„ credit searches;
„ conduct of any existing bank or loan accounts with the lender.

They will look at previous credit. People who have had credit and handled it well are more favourable than those that never have it.

Only make minimum payments on a credit card is bad.

Multiple applications for credit cards and loans is bad

Question 13

What are the two types of mortgage guarantees

Answer 13

Full liability
• The guarantor is liable for the entire debt if the borrower defaults on the mortgage payments.
• The guarantor must usually be able to demonstrate that they can afford at least 100% of the mortgage, in addition to their own existing commitments.
Limited liability
• The liability is limited to the difference between the loan the lender would normally agree and the loan needed, with a possible additional percentage of perhaps 10%.

• The liability is shown as a percentage of the mortgage.

Question 14

After a CCJ if an employee (not sole trader) fails to pay the creditor amcs. Go back to court for a?

Answer 14

Attachment of earnings order

Money to be paid back taken directly from pay.

Question 15

What happens to a bankrupt with sole ownership on a property

Answer 15

Over 1000 pound equity the property transfers to a trustee who becomes the legal owner and can sell it.

A bankruptcy registration notice is entered at the land registry.

Only trustee can deal with matters relating to the property.

Question 16

What situations arise if the bankrupt jointly owns a property and only one of them is bankrupt

Answer 16

„ -The bankrupt’s interest in the property does not pass to the trustee in bankruptcy.
„ -The trustee in bankruptcy can apply for a possession order and sell the property if the bankrupt’s interest in the property (share of the equity) is £1,000 or more.
„ -The trustee enters a Form J restriction at the Land Registry. See other card
-bankrupt’s interest exceeds £1,000, the forced sale of the mortgaged property can be delayed for one year
„ -The joint owner can ‘buy out’ the bankrupt’s interest in the property from the trustee

Question 17

is there a time limit that the trustee has sell the bankrupts property?

Answer 17

3 years - only property

Unlimited time- 2nd home

Question 18

What are IVAs and CVAs

Answer 18

Where creditors that account for 75% agree to it the debt , interest and charges are frozen and the debtor pays jt back.

Question 19

What are the 3 main money laundering offences

Answer 19

Concealing , acquiring, arranging

Question 20

What money laundering offences may advisors be liable to?

Answer 20

Failure to disclose and tipping off.