We’ve responded to the FCA’s consultation on the sharing of consumer credit information. As part of its wider Credit Information Market Study, the FCA is proposing to mandate most firms to report credit data with designated credit reference agencies.
We support the FCA’s overall approach to mandatory reporting, which we believe stands to particularly benefit financially excluded customers and the community finance sector that serves them. However, we would like to better understand the agreements not covered by the FCA’s proposed approach and see more assessment of what impact this omission will have on financial exclusion.
We believe that a far more proportionate and practical way to implement mandatory reporting would be for CRAs to introduce a single portal through which lenders could share data with all designated consumer credit reference agencies (DCCRAs). Under current proposals, all lenders in scope of regulation will be required to establish individual reporting relationships with each designated CRA, creating a significant administrative burden. A single portal could also streamline the corrections process for lenders, and would simplify the process of designating a new CRA, supporting competitive entry to the market.
In response to the FCA’s proposals, industry should prioritise the development of a common data format, remedy 2B of the Credit Information Market Study (CIMS), as soon as possible. Limitations around the flexibility and granularity of the current reporting approach mean that mandatory reporting will likely lead to more data being shared in a way that leads to poor consumer outcomes, which could be avoided through a reformed data format.
We think that there are issues with the proposed approach to the designation of CRAs. Designation based on coverage creates a circular barrier to entry for challenger CRAs. DCCRAs will receive a competitive advantage from having full coverage of the market, while challengers CRAs will struggle to build up coverage without designation. Instead of a coverage test, we would support a test based on a CRA’s capability to securely and accurately receive and process data from lenders at scale.
We also support measures to improve the quality of data reporting by lenders. In particular, we strongly support requiring lenders to mark county court judgement (CCJs) as satisfied. The burden of proof currently rests on consumers who may already be struggling with problem debt, and in practice very few CCJs are marked as satisfied, leading to worse outcomes for consumers and poorer data quality for other lenders.
