The Credit Information Market Study Final Report is in…. and change is afoot

After highlighting ‘several areas for improvement’ in the credit information market in 2022, the FCA have now published a report laying out its response including how it intends to improve the industry.

The priority will be to establish a new credit reporting governance body (CRGB) with broader objectives than the incumbent Steering Committee on Reciprocity (SCOR). The CRGB is to be more inclusive, transparent, and accountable, with its formation expected in Q4 this year. The CRGB’s first objectives will be to introduce mandatory data sharing, resulting in lenders having to provide their credit information across all 3 Credit Reference Agencies (Experian/Equifax/TransUnion). While the majority of tier 1 firms already supply their information, making data sharing mandatory to all 3 CRA’s will introduce additional requirements to many financial institutions.

The FCA are aiming to improve the timeliness, coverage, quality, and consistency of credit information to help deliver better outcomes for consumers through enhanced analytics and decisioning. In support of this, CRA’s will be subject to additional obligations including new regulatory reporting requirements aimed at allowing the FCA to monitor data quality. In support of its objective to improve data quality the industry will also be driven to lead several initiatives, the most significant being a common data reporting format to improve consistency and granularity across CRAs.

Improving consumer awareness and engagement will also be a focus for the FCA, with streamlined access to statutory credit reports and credit file correction resulting in additional responsibilities for the industry at large. Improved consumer awareness will lead to an increase in customer challenge, requiring firms to face the need to support enhanced processes and additional resource requirements.

Through these changes the FCA also wish to improve competition and innovation. The changes discussed will help to level the playing field between CRAs. To further this objective, the regulator aims to improve Current Account Turnover (CATO) data and update access arrangements.

The planned changes will have a significant impact upon the industry with a new governing body driving an evolution in firm’s IT infrastructure, data, and consumer support processes. There will be consequences for credit risk models and broader decisioning with a shift in data inputs.

To better understand the implications of these changes, what the credit information industry will look like in the future, and to discuss the impact this will have on your firm, reach out to us – info@4-most.co.uk

Further reading: https://www.fca.org.uk/publication/market-studies/ms-19-1-3.pdf