Fair4All Finance responds to the FCA on reforming the credit information market

We’ve responded to the Financial Conduct Authority’s Credit Information Market Study.

Credit information gives insight into an individual’s financial position. It influences the decisions firms make to serve customers, and so is an important factor in people’s ability to access fair financial products and services.

The FCA’s study has found several aspects of the credit information market which are not working well, such as poor quality data, inconsistencies in credit reporting around customers in financial difficulty, and barriers to consumer engagement with credit information.

The FCA has set out a number of proposals to address these issues – we support these and believe they set out a pathway to create a better credit information market for customers and lenders.

Customers in financially vulnerable circumstances and the organisations that serve them stand to particularly benefit from these proposals. Too many customers are excluded from access to credit due to the current state of the market, and community finance providers often have access to worse credit information than others.

In our response we give feedback to the FCA

• We agree with proposals to establish a new governance body to oversee the reforms, and strongly support plans to put financial inclusion at the heart of the new body
  • We would like to see more regulatory leadership of the reforms and governance structure to ensure that proposals are delivered in a timely way. And we would like to see more robust governance of the body, potentially including a separate independent board
  • The FCA should consider the long term financial sustainability of the entity and take a stronger interest in funding, given the influence that funders can have over governance
  • Consumer voice should be hardwired into the new governance structure, and representatives should have the influence and resource they need to properly gather and represent the diverse views of consumers
• We support mandatory data sharing as a way to improve access for credit for excluded customers. But this must be accompanied by measures to streamline the reporting process for lenders
• We recommend that the new governance body aligns with the FCA to recognise the important role of community finance providers in financial inclusion, and their non profit status, and offers concessionary pricing to ensure responsible lenders have access to data at a fair cost
• We support common data formats and a more granular approach to reporting forbearance arrangements and defaults, as well as proposals to reduce the time that debt solutions appear on people’s credit files. This is an opportunity to make the credit information market better reflect the complex reality of customers’ financial lives, and work better for people in financial difficulty