Credit Firms Face Ban on Sharing Positive Customer Information

Strategic Insights -

Personal credit companies and storecard and credit-card companies may no longer be able to automatically pass on details of good customers' records to outside agencies without their consent, amid growing concerns about the implications of modern information technology on individuals' right to privacy. The Data Protection Registrar, Eric Howe, has recommended that lenders should not be allowed to insist that borrowers provide "white information" about their credit habits as a condition of giving them any credit. This move has been met with resistance from the finance and leasing association, who claim that it would be a "fraudsters' charter" and would push up defaults.

Key Takeaways:

  • The Data Protection Registrar, Eric Howe, has recommended that lenders should not be allowed to insist that borrowers provide "white information" about their credit habits as a condition of giving them any credit.
  • The Finance and Leasing Association claims that this move would be a "fraudsters' charter" and would push up defaults.
  • The association argues that lenders need access to "white information" to assess people's ability to take on new loans and to ensure responsible lending.
  • The Protection Registrar's department accepts that finance companies may be more wary of providing loans to people who withhold "white information," and suggests that they may insist on a bank reference.
  • If potential borrowers want to keep their finances private from a partner, they may have a genuine reason for withholding "white information."
  • Lenders can inspect details of individuals' credit files for a fee of £1, and individuals can also request a copy of their file from the credit-reference agency.

Statistics:

  • Almost 1m county-court judgments are made against debtors every year.
  • The number of individual debtors with three or four judgments against them is much smaller.
  • 80% of Britain's personal credit is supplied by finance companies, excluding banks and building societies.
  • Haifa lender in Britain uses a credit-scoring system to assess creditworthiness.
  • 3 major credit-reference agencies (Infolink, CCN Systems, and Equifax) dominate the market.

Sources:

  • The Sunday Times, 1994.
  • Office of Fair Trading (OFT).
  • The Finance and Leasing Association.
  • Data Protection Registrar's department.
  • The Consumers' Association Money Section.
  • Infolink.
  • CCN Group.
  • Equifax Europe.