Improvements Needed To The Credit Information Market

Dec 5, 2022 10:13:34 AM

What has happened?

In November 2022, the FCA set out its proposals in the interim report forming part of its Market Study MS 19/1, intended to improve the credit information sector so it can deliver higher quality and more comprehensive information for consumers and firms.

It is asking for feedback on the findings and potential remedies set out in the interim report to be received by 24 February 2023 and it expects to publish a final report in 2023 Q3, which will set out the final findings and report back on progress made towards revised financial services governance arrangements.

What are the key points of the proposals?

The FCA explained in the interim report that it wants to see a higher quality of credit information so that lending decisions better reflect borrowers’ financial circumstances.

The Market Study proposes a range of measures to improve the market, such as:

• establishing a new, more representative and accountable industry body to oversee arrangements for the sharing of credit information,
• improving the quality and coverage of credit information,
• enabling greater competition and innovation through potential changes to data access arrangements and more timely data reporting, and
• simplifying ways for consumers to access their credit file and dispute any inaccurate information held about them.

The FCA explains in its study that lenders are largely happy with the breadth of information they have access to, but that there are differences in the information held by different credit reference agencies. While 90% of consumers are aware of the existence of credit scores and files, the FCA’s Borrowers in financial difficulty research revealed that 47% of borrowers in financial difficulty mistakenly believed that the simple act of contacting lenders would have an adverse impact on their credit file, with 16% ignoring contact from lenders as a result.

Further research by the FCA about how consumers use credit information found that 43% of consumers did not realise they have a right to access their statutory credit report without charge.

The FCA has asked the industry to set up a new representative body in 2023 and will then work with the industry to agree on further improvements in this sector, in particular in relation to financial services governance standards.

How can we help you?

If you’d like to know more about how we can help you with your financial services or governance or credit information service arrangements, or any other regulatory compliance issues, our specialist team is here to help.

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