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Credit Reference Agency Triumphs in Data Protection Test Case

A businessman who won a landmark ruling that a credit reference agency had breached its duty under the Data Protection Act 1998 by wrongly branding him a bankrupt has had his victory turned to ashes by the Court of Appeal. Dashing Keith Smeaton’s hopes of £500,000 compensation from Equifax Plc. the court ruled that the decision in his favour had been ‘not just surprising but seriously aberrant’.

Mr Smeaton applied to the National Westminster Bank to open an account for his company, Ability Records Limited, in 2006 but was turned down, apparently on grounds that Equifax held ‘adverse data’ relating to him. Looking for an explanation, he discovered that Equifax’s records described him as bankrupt.

Although he had briefly been made bankrupt in March 2001, the bankruptcy order had been rescinded within three months. However, that fact had not made it onto the credit reference agency’s files. Equifax immediately amended its records when Mr Smeaton complained, explaining that the rescission of the bankruptcy order had not previously been published in the London Gazette and that it had acted promptly on finding out the true position.

Mr Smeaton blamed Equifax for very substantial business losses and his ‘descent into a chaotic lifestyle’. He had been reduced to homelessness and living in his car for eight months in 2006.

Allowing Equifax’s appeal, the court decided that there was no basis for the first instance judge’s ‘seriously aberrant’ ruling that Equifax had caused Mr Smeaton’s losses. The court noted that the purported bankruptcy had not been the only adverse data held in Mr Smeaton’s credit record and that, even after Equifax corrected its files, the bank had refused to extend credit to his company.

The judge’s conclusion that Equifax had breached its duty by failing to do more to persuade the government that bankruptcy annulments and rescissions should be automatically advertised was also insupportable on the evidence. The ruling in Mr Smeaton’s favour had, in terms of duties imposed by the act, ‘placed the bar far too high’ for credit reference agencies, the court concluded.