Cicero Policy Briefer

Issue 15, August 2007

Sharing Benefits: business and consumers

By Jill Stevens, Director of Consumer Affairs, Experian Ltd

To many UK citizens, joined-up government is an attractive proposition. The suggestion that millions of taxpayers' cash is wasted each year as disparate departments duplicate effort is one that gives grist to this particular mill.

But there are others, some of them powerful people, who are less than comfortable with the idea of joining up different sources of personal information and whose Orwellian warnings should be heeded, if only because their reservations are shared by a large section of the general public; indeed, because their views often influence the attitudes of the general public—and public confidence is needed before any bold plans can be advanced.

The only way consumers will be convinced that they need not forsake their right to confidentiality and privacy by agreeing to the sharing of their personal information is to provide evidence that joined-up can (as it should) mean more efficient and more convenient.

A good example of where data sharing benefits organisations and individuals alike can be found in the private sector, where financial institutions have been sharing credit data for some time.

Experian’s credit reference agency, formed in 1980, plays a crucial role in enabling credit grantors to make responsible, as well as profitable, lending decisions. Lenders place up-to-date details of their customers’ credit agreements on a database to which they all have access. When a consumer applies for credit lenders are therefore able to see what credit is already available to that applicant, what credit is being used and whether or not repayments have been made on time in the past three years. A credit search also reveals recent court orders for debt and bankruptcy details.

Sharing this information should, and usually does, mean that lenders are able to avoid advancing credit to those who are already deeply or over-indebted and to whom further borrowing would be too heavy a burden.

The system doesn’t always work, though. People do borrow too much and sometimes this has unfortunate and even tragic consequences. Lenders operate to a risk model. There are gaps in the information. A borrower may have a perfect repayment history and have no arrears because he regularly pays off the full amount owed on a credit card; equally his lack of arrears could be because he is paying only the minimum repayment each month—which would make him a less safe customer to lend more to. So there are plans to plug some of the holes.

And there is good news for John McFall, chairman of the Treasury Select Committee, who expressed some frustration during a recent Cicero Consulting webcast at a lack of progress on plans by lenders to share additional behavioural data. A project led by APACS, the UK Payments Association, has led to its members sharing new data that will show, for example, when a credit applicant has ‘maxed out’ and relies on minimum repayments to avoid arrears, or when cash is advanced on a card. The first lenders to share this new data should begin accessing it through Experian by the end of this year. If they don’t make this deadline, I suspect they can expect more comment from Mr McFall.

Over the last few years, lenders have been under a huge amount of pressure to share more data, from consumer organisations, the money advice sector and government, in particular the Treasury Select Committee.

Paradoxically, lenders are still prevented, by government, from giving each other access to information relating to credit accounts opened before it was the norm to obtain explicit consumer consent to share data. This prevents them from sharing data on around 40 million credit accounts. A Department of Business, Enterprise and Regulatory Reform announcement is eagerly awaited by the credit industry on this issue. Consultation ended in January this year.

It is right that consent should be the key to data sharing. Credit data is shared only with consumer consent, which is typically obtained at the point of application for credit; notification clauses or scripts clearly state how the data will be stored and used. Consumers should know where their personal information (credit or otherwise) is being stored, understand how and why it is being used and feel they have some measure of control over its access.

Experian runs a very busy consumer education programme explaining how people can access the credit data held about them, how it can be amended if necessary and how its use really does help make life more convenient. The programme has been running for 11 years and many, many more consumers now understand and approve of the role the credit reference agency plays in the credit granting process. But myths still exist. As does prejudice. I have learned that anyone who wants a smooth ride in the use of personal information, even for the good of the people to whom it relates, needs to work very long and very hard—public buy-in is crucial if projects which rely on being joined up are to succeed.

Jill Stevens is the Director of Consumer Affairs at Experian Ltd and can be contacted here.

Experian is a global leader in providing information, analytical and marketing services to organisations and consumers to help manage the risk and reward of commercial and financial decisions.

Combining its unique information tools and deep understanding of individuals, markets and economies, Experian partners with organisations around the world to establish and strengthen customer relationships and provide their businesses with competitive advantage.

For consumers, Experian delivers critical information that enables them to make financial and purchasing decisions with greater control and confidence.

Clients include organisations from financial services, retail and catalogue, telecommunications, utilities, media, insurance, automotive, leisure, e-commerce, manufacturing, property and government sectors.

Experian Group Limited is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. It has corporate headquarters in Dublin, Ireland, and operational headquarters in Costa Mesa, California and Nottingham, UK. Experian employs around 15,500 people in 36 countries worldwide, supporting clients in more than 65 countries. Annual sales are in excess of $3.8 billion (£1.9 billion/€2.8 billion).

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