FCA and credit data: are firms in the stocks?

Competition issues were once a straightforward affair. In the 13th century, the King set rules on the price of bread and ale. If you breached the rules, you got put in a pillory and pelted with foul detritus.

We live in more complex times. The Financial Conduct Authority (FCA)’s credit information market study has just produced a hefty interim report with six annexes and big implications for all firms that use credit reference agencies (CRAs). To make sense of it, Equifax held a roundtable with legal and credit risk experts from lenders, Eversheds Sutherland and UK Finance. 

What did we learn?

Firstly, the FCA found that the market is working well. The CRA market and the prices it charges are competitive. The data and analytics CRAs supply are of good quality. CRAs and lenders are innovating together. So nobody has been sent to the stocks.

Secondly, there was broad agreement that where the FCA is looking to improve the market further, it is zooming in on the right problems. Its proposed solutions are complicated but, at this early stage, seem sensible. Firms are optimistic that the reforms can improve their ability to make better, more efficient and more transparent credit decisions for customers.

Thirdly, there is a lot of work for us all to do. In most cases, the FCA wants the solutions it proposes in its report to be “industry-led”. Lenders and CRAs will need to partner with consumer groups to work through the details of the reforms and how to implement them across the market.

To give one example, the FCA has proposed that lenders should report data to all “designated” CRAs, using a common format, with consumers able to use a one-stop-shop to correct data errors more quickly. That is a lot to resolve as an industry.

At the same time, individual firms are also thinking about what the reforms mean for them. The data lenders get from CRAs should become more consistent and comprehensive. But the way they get it might change and lenders might need to invest more in reporting data and resolving consumers’ data queries.

This market study is also the first one the FCA has published in the era of the Consumer Duty. Some experts at our roundtable thought that the Consumer Duty means firms cannot wait to start making changes the FCA wants to see.  They should review the market study report and think about what changes they need to make today.

In conclusion, there is a lot to do, enough perhaps to drive some to seek occasional relief in bread and ale in the months ahead. But it is undoubtedly a huge opportunity to improve the market for firms and customers.

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