IC celebrates Third Party Data but doesn't rule out more datasharing

As the Office of the Information Commissioner celebrate their victory over the exclusion of third party data from credit reports, concern continues to grow about over-indebtedness. The credit bureau data plays a crucial part in credit assessment today in the UK and lenders don't see a full picture.

Fraser Coutts UK Economic advisor for the FSA said the FSA saw five scenarios, one of which was a sharp slowdown in consumer spending. "Over the past four to five years consumer spending had grown at 4% per year. An obvious trigger of a slowdown would be the fall in house prices,”  he said. Coutts went on to explain that the FSA's “Financial Risk Outlook”  looked at how consumers are coping and would cope with a rise in rates. "At 3.5% base rate, 36% were struggling or falling behind with credit commitments. At the current rate of 4.75%, this is projected to be 50%."

Murray Bailey, director of the credit consultancy Windsor CME, points to the report from the Task Force on Over-indebtedness (2004). "There is a call for earlier action to both prevent and cure over-commitment," he said. "However, the credit bureaux do not hold a complete picture of a consumer's debt and income information is only available through Lifestyle modelling at the postcode level."

Coutts calls for more data sharing and suggested that the credit bureaux should be doing more to obtain a complete picture. Coutts goes on to suggest that savings accounts would be an example of information that could be shared that would show ability to pay. 

Melanie Mitchley, of the new UK credit bureau Callcredit says that it is important that data is not shared just for the sake of it. "Value should be added to consumers and lenders alike," she says. "Part of the debate includes a clear understanding of permissible uses of existing and any new data sources. This is important if everyone is to feel comfortable and not threatened by any increased sharing." 

Steve Taylor, of credit bureau Equifax, points out that datasharing is an industry issue rather than the credit bureaux’s responsibility. As far as widening the sharing of data by the industry Ian Evans of Lloyds TSB bank points out that the wider sharing of data is at odds with the Information Commisioner's view.

David Smith from the Office of the Information Commissioner said it was hard to see how savings account information could help the credit decision. Smith said that the industry "shouldn't push the primary question before addressing the other issues." He was referring to the rules of reciprocity and suggests that having 'partial subscribers' was contrary to supporting responsible lending.

Bailey suggests that searches are an important aspect of credit assessment and said that if bureaux had to share search data, lenders would have a better picture of a consumers credit activity. "Seeing a change in activity, particularly in someone applying to many lenders attempting to get credit is a clear indicator of the type that the Task Force would approve."

Smith says that there was no primary reason why the industry couldn't share search information. "In fact," he adds, "there is a good responsible lending argument for it. With a clean sheet of paper we would like to see a common dataset. We would like to see competition, not on the data, but on the delivery."