FCA proposes action to close gaps in borrowers’ credit files

Lenders could have access to more comprehensive information to support lending decisions, under new proposals by the Financial Conduct Authority (FCA).

The FCA is consulting on designating certain credit reference agencies (CRAs). If a lender shares credit information with one designated consumer CRA, it would be required to share it with them all.

The changes aim to close gaps in consumers’ credit files and ensure these more accurately reflect people’s financial circumstances. CRAs collect personal financial data – including credit repayment histories – to provide lenders with information that helps inform lending decisions.

Where the information CRAs hold is limited, people may face barriers to accessing credit, or be exposed to increased risks of unaffordable lending, errors or fraud. The FCA’s proposals aim to improve how credit information is shared across the system, benefitting both consumers and firms.

Alison Walters, Director of Consumer Finance at the FCA, said: “Access to affordable credit relies on good quality data – it’s vital in helping consumers navigate their financial lives. That’s why we want to make sure everyone’s credit information is as full and accurate as possible.”

Peter Tutton, Director of Policy, Research and Public Affairs at StepChange, said “We’re pleased to see the FCA taking action to improve the quality of credit information. High quality credit information is crucial to support people to access affordable credit, essential services and prevent debt problems. Too often gaps and inconsistencies in credit information have excluded some consumers while leading to unaffordable lending to others. These proposed reforms will help to create consistency by ensuring information on a borrowers’ credit history is shared across all credit reference agencies (CRAs).

“We also welcomed the Government’s support in the recent Financial Inclusion Strategy for the cross-sector initiative to develop a new framework to improve the way coerced debt is reflected in the credit files of victim-survivors of economic abuse. It’s vital that work is taken forward as a matter of urgency.”

Richard Pinch, Senior Director of Risk at Broadstone, in their Banking & Capital Advisory division, said “Ensuring lenders have access to more complete and consistent credit data is a logical and welcome step, as high-quality information sits at the heart of both prudent lending and good consumer outcomes. Requiring firms to share data with all designated credit reference agencies should help reduce blind spots in credit files, improve risk assessment and support more accurate pricing and affordability checks.

“For lenders, however, the proposals will mean reviewing operational processes to ensure they can comply on a consistent basis. There will also be a focus on data quality as more comprehensive reporting will increase the visibility of any gaps or inaccuracies.

“If implemented effectively, the reforms have the potential to widen access to credit for consumers, particularly for those whose financial positions are not currently fully reflected in their records. Borrowers could benefit from increased competition in retail lending markets which could feed through into increased choice and potentially more attractive pricing while strengthening safeguards against over-indebtedness.

“The consultation will be an important opportunity for firms to engage on the practicalities, proportionality and implementation timelines to ensure the new framework delivers the intended benefits across the market.”