The Financial Conduct Authority (FCA) has published a proposed a range of reforms it which it says would improve quality of information collated by credit reference agencies (CRAs) to ensure consumers’ credit files better reflect personal financial circumstances.
In November 2022, the FCA published an interim report which found that whilst the credit information market was working well in a number of ways, there were also several areas where the market could be working better.
Issues included significant differences in data between CRAs and that consumers lacked awareness of how to access and dispute credit information.
The proposals will require FCA-regulated data contributors, such as lenders, to share credit information with CRAs. CRAs will also need to ntroduce a common data reporting format to enhance consistency and promote competition. THe FCA says this will rovide greater control for consumers over how they are viewed through making it easier for consumers to record non-financial vulnerability information.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said “Poor quality credit information can result in people being cut out of the credit market or taking on more debt than they can afford.”
“Our proposals aim to improve competition and enhance the quality of credit information as tech developments occur. These improvements will help deliver more effective lending decisions, particularly for consumers with limited or poor credit records, and support sustainable economic growth.”
“The changes will also enable people to more easily challenge decisions when mistakes are made.”
The announcement also includes the terms of reference for an Interim Working Group, set up to establish a new credit reporting governance body, designed to be more inclusive, transparent and accountable, which will oversee many of the changes proposed. The FCA expects the working group to start its work in January next year and deliver in nine months.
Jackie Keogh has been appointed as the Chair of the working group. She has more than 30 years’ experience in the financial industry, mostly in corporate banking, and has been a Senior Advisor at the FCA since 2020. She will step down from that role before taking up her new position. By the end of 2024, the FCA expects to begin consulting on new measures, including the introduction of a mandatory reporting requirement.