Frozen out by AIB over decade-old bad debt

My daughter, a final-year college student, asked me to go guarantor on an increase of her overdraft of €500 to €1,000 to allow her get driving lessons. AIB had requested a guarantor.

I got a call today from the bank. I wouldn’t do! I had a Visa card from them taken out in 2003, revoked in 2005 and paid off in full with the account cleared by me in 2006!

Yet over 10 years later they have me recorded with a low grade! A6 or an 8 I think. Now, my Irish Credit Bureau rating is fine no problem but I’ve got a life sentence from AIB. At the time, in 2005, AIB told me it was only a 5 year ban!

You know with good behaviour you can get out after nine years with A life sentence for murder. With AIB, you get done for life. How much did we taxpayer fools bail them out for again?

Mr J.O’R., Cork

I’m tempted to say that it goes to show you should never trust a bank. Actually, you should never trust a bank. Your relationship with them is on the basis of a contract. They offer certain services – like paying interest on savings and offering loans and overdrafts – and you undertake to repay any borrowings in accordance with the terms of the loan agreement.

In this case, it would appear you had certain issues with your Visa account over a decade ago. And they were clearly serious enough for the bank to revoke your card. Back in 2005, ahead of the crash, banks were happily pushing credit at all comers: to turn off the tap and take back your card would have been fairly drastic back then.

Regardless, you sorted out your affairs, paid the bank back in full (something that many subsequently caught up in the crash will never be able to do), and moved on.

What’s not clear from your letter is whether, once you paid off your debt, you continued banking with AIB or chose to bank elsewhere.

If you went elsewhere, it’s possible AIB has no direct experience of your subsequent ability to manage banking affairs – though clearly, like any other lender, they do have recourse to the Credit Bureau where they should be able to ascertain that you are of good financial character for at least the past five years.

If you have been banking with them since the Visa card episode, and have had a clean banking “record” over the past decade, then the issue is of slightly more concern.

The bank told you that you would be “banned” for five years. I assume this meant they had no interest in even considering a loan application from you in that period. Of course, that does not mean they are obliged to grant you a loan thereafter, only that they will consider an application.

However, if they are now effectively saying you can apply but our inhouse rating on you is so low, you are unlikely even to be considered as guarantor on a €1,000 overdraft, then you clearly need to consider your position.

While the Credit Bureau is a repository of information on credit history, there is nothing forcing lenders to ignore any other information they may have about repayment capacity, nor should there be. But, equally, a balanced consideration of such an application would presume a fair survey of actual creditworthiness.

You should write to the bank, especially if you still use them, seeking an explanation and some guidance as to any future relationship as this has clearly been unexpected and a embarrassment in front of your daughter.

If that does not yield satisfaction, your best course course of action might be to follow the bank’s example ...and take your business elsewhere.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice