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Prize draws that arrive in the post can be alluring - but some carry a sting in the small print that could damage your finance rating
Fears are growing that hidden credit checks, the details of which are often buried in the small print of junk mail, can damage a consumer's credit rating.
The Information Commissioner Office (ICO) - a watchdog set up to promote access to official information and protect personal data - has launched a consultation into the checks written into marketing mailshots or innocent-looking prize draw entries.
An unexpected credit check, particularly at a time when you're applying for a major financial product such as a mortgage, credit card or personal loan, could "tip the balance against you, especially if you're a borderline case", says James Jones at Experian credit reference agency.
Too many checks can easily put off lenders and signal you as a high risk. "Consumers do need to know what's going to happen to their details when they send them off. When a lender checks your credit report, the evidence, or 'footprint', of that check is there for 12 months. Regardless of whether you were accepted or not, the credit check or application will show up."
Livid readers have been in touch with Cash after being recently targeted by catalogue companies.
Thirty-year-old Helen Davies received a mailshot from Littlewoods.com, the catalogue company owned by the Barclay brothers' Shop Direct Group, telling her she was a finalist in a £100,000 prize draw.
To stand a chance of winning its glitzy contest, Davies thought she had simply to send off a detachable form, but then spotted a proviso in tiny lettering at the foot of the letter: her entry would also open a Littlewoods credit account in her name. Only when she trawled through more small print hidden overleaf did she discover the competition actually meant her credit record would be searched.
"It's really shocking," Davies says. "Seduced by the idea of simply entering the prize draw, I could easily have sent it off without having noticed or read all the small print. It could have had a negative effect on my credit card or personal loan applications, especially if I'm rejected." Davies has sent a copy of the letter to the Advertising Standards Authority (ASA).
A spokesman for Littlewoods.com argues that it has been transparent: "It clearly states, on the letter, that a credit account will be open and that Ms Davies's acceptance is subject to status."
However, its lack of prime position - a mention in the small print - and unclear meaning relating to an actual "credit check", will be easily overlooked by many, particularly those in more desperate need of cash and in less of a mind to read the terms and conditions of what appears to be a simple prize draw.
The ICO says that any such prize draw should make clear what will happen to information when sending off details, and has launched a "small print, big print" campaign to encourage companies to make their privacy and marketing much clearer. Its consultation on a new code of practice for "privacy notices" will try to standardise this.
"In cases where the consumer is faced with a credit account being opened, it would be preferable to explain, in clearer language, that they will be credit-checked," an ICO spokeswoman says.
"If companies are not making it clear when they are credit-checking people, this is a concern as these checks will stay on people's records. We would encourage all companies to spell out that a credit check is taking place."
The ASA admits that there are no specific rules regarding credit checking within promotions, and that "generally, no marketing communication should mislead, or be likely to mislead, by inaccuracy, ambiguity, exaggeration, omission or otherwise".
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