The Financial Conduct Authority said on Tuesday that Britain's 'highly concentrated' consumer credit ratings market, which is used to obtain loans, is not working well and that a new industry body is needed to help improve the quality of scores.
Experian, Equifax, and TransUnion account for nearly all of the 800 million pound ($946.32 million) credit reference agencies (CRAs) sector in the United Kingdom.
The FCA said in an interim report that there are no competition concerns that require immediate action that switching between them is difficult.
Credit agencies also assist consumers in verifying their identities in order to combat fraud and in determining their affordability.
"The credit information sector needs to work well to support retail lending and to help ensure that credit is offered only where appropriate and at a fair price," the watchdog said,
An industry committee for lenders and raters to share credit information on consumers is too narrow, with no consumer or 'challenger' company representatives.
The FCA stated that there are significant differences in credit information held by the three major companies, which are "very likely" to influence bank lending decisions.
Equifax said it was reviewing the FCA report, and Experian said it agreed with a recommendation to improve its credit information coverage. TransUnion did not respond immediately.
In the absence of "significant disruptive entry," the FCA stated that a three-year combination of industry-led change and regulatory intervention is required to provide better service to consumers by establishing a new, broader sector body.
"We see reform to industry governance arrangements as a key precursor to many of the other potential remedies we are proposing."
Once a new industry body is in place, the watchdog would agree on a three-year reform plan, which could include potentially broadening the range of data reported to rating agencies in order to improve data quality, consistency, and speed.
Emma Steeley, CEO of Freedom Finance, a digital lending marketplace, believes that expanding the scope of information to include buy-now-pay-later options will benefit young borrowers who may have had less time to build their credit score.
A public consultation on the FCA's proposals concludes in February, with a final report outlining final findings and providing an update on progress toward revising how the industry operates collectively in the third quarter of next year.
(Source:www.reuters.com)
Experian, Equifax, and TransUnion account for nearly all of the 800 million pound ($946.32 million) credit reference agencies (CRAs) sector in the United Kingdom.
The FCA said in an interim report that there are no competition concerns that require immediate action that switching between them is difficult.
Credit agencies also assist consumers in verifying their identities in order to combat fraud and in determining their affordability.
"The credit information sector needs to work well to support retail lending and to help ensure that credit is offered only where appropriate and at a fair price," the watchdog said,
An industry committee for lenders and raters to share credit information on consumers is too narrow, with no consumer or 'challenger' company representatives.
The FCA stated that there are significant differences in credit information held by the three major companies, which are "very likely" to influence bank lending decisions.
Equifax said it was reviewing the FCA report, and Experian said it agreed with a recommendation to improve its credit information coverage. TransUnion did not respond immediately.
In the absence of "significant disruptive entry," the FCA stated that a three-year combination of industry-led change and regulatory intervention is required to provide better service to consumers by establishing a new, broader sector body.
"We see reform to industry governance arrangements as a key precursor to many of the other potential remedies we are proposing."
Once a new industry body is in place, the watchdog would agree on a three-year reform plan, which could include potentially broadening the range of data reported to rating agencies in order to improve data quality, consistency, and speed.
Emma Steeley, CEO of Freedom Finance, a digital lending marketplace, believes that expanding the scope of information to include buy-now-pay-later options will benefit young borrowers who may have had less time to build their credit score.
A public consultation on the FCA's proposals concludes in February, with a final report outlining final findings and providing an update on progress toward revising how the industry operates collectively in the third quarter of next year.
(Source:www.reuters.com)
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