About Innovate Finance

Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK. Innovate Finance’s mission is to accelerate the UK's leading role in the financial services sector by directly supporting the next generation of technology-led innovators.

The UK FinTech sector encompasses businesses from seed-stage start-ups to global financial institutions, illustrating the change that is occurring across the financial services industry. Since its inception in the era following the Global Financial Crisis of 2008, FinTech has been synonymous with delivering transparency, innovation and inclusivity to financial services. As well as creating new businesses and new jobs, it has fundamentally changed the way in which consumers and businesses are able to access finance.

In preparing this response we have consulted FinTech firms including credit information users and alternative credit information providers.

Summary

The presence of third party providers of high-quality, trustworthy and predictive credit information is a critical part of a modern credit market. Unfortunately, the current UK credit market is not working in a way that achieves the best outcomes for consumers, innovative credit providers and continuous innovation in credit information. The product is not consistent with good outcomes for customers or information users and the oligopolistic market structure is not one that readily adapts to change, supports innovation nor supports better outcomes.

The credit reference agency (CRA) market model did widen access to credit and financial services in the past but it is no longer fit for purpose. The current model of credit information market does not reflect the current and future technological possibilities and nor does it reflect economic and societal circumstances, particularly during a time of increased living costs.

Evidence from the FCA study shows the market is not working and governance that is broken. The market study provides some good analysis of the market and is a significant contribution to the evidence on the functioning of the UK credit information market. The proposed remedies, however, fail to reflect the significant concerns which the evidence shows. The Financial Conduct Authority (FCA) proposals that reform should be led over the next 3 years by a reformed version of the existing industry body are inadequate and inappropriate for the challenge and importance of reform.

Future remedies in the market must better harness technology, including Open Finance, which can provide a more holistic picture of a person’s credit situation. The remedies proposed in the market study remedies do not currently make adequate linkage with the wider policy and regulatory and market direction of travel on Open Finance and reusable Digital ID.

Further work is needed on developing an alternative UK system for credit information, exploring alternative models and, in the meantime, taking action to address some of the issues and move toward future solutions (e.g. more rapid progress on Open Finance and Digital ID) and looking at how regulatory requirements can better support a more diverse market of providers in the shorter term.

The starting point needs to be an agreed vision of the future state and outcomes of the UK credit information market, one which treats credit information as a utility that supports societal and economic outcomes; that should be open to innovation and support the UK’s primacy in FinTech; that should provide fair competition and access; and that supports good consumer outcomes, financial stability and financial inclusion.

Key points

We note the study’s conclusions that quality of date affects the appropriateness of lending decisions and that there are differences in data between CRAs. The quality of data is hindered by the fact that the same information is not shared with all providers. This creates the potential that customers are being declined credit that they may be able to repay or being given credit they are unable to repay.

The market study identifies two specific market failures:

• “There are insufficient incentives on individual CIUs to share data with all 3 large CRAs. It can bring additional costs but, without other CIUs doing likewise, may bring little immediate benefit. Therefore, some CIUs do not do so.
• The incentives on CRAs to demand higher quality data are also weak. Although better quality data is in the interests of the CRA, it may impose higher costs on data contributors and increases the likelihood of them switching away (if the data contributor is also a customer) or simply ceasing to provide data (if the data contributor is not a customer).”

In other words, the oligopoly of CRA providers means that it is too costly for credit information users to share data with all CRAs and the market dynamics mean that the CRAs are unable to demand better quality data because this might mean they lose business.

However, there are other market failures that the report does not examine in more detail, notably the study does not address all the issues raised in the Woolard Review, published by the FCA in 2021 (The Woolard Review - A review of change and innovation in the unsecured credit market, published by on 2 February 2021). Recommendation 14 of the Woolard Review stated that: “Through the Credit Information Market Study or as part of a wider strategy, the FCA should:

• make clear the outcomes which the market needs to achieve for consumers and lenders, and how these will support a healthy credit market, including where consumers interact directly with Credit Reference Agencies (CRAs) and Credit Information Services (CISs)
• assess whether the credit information market is operating is a way which enables consumers who use credit responsibly to build their credit file and access more credit options
• consider whether a mandatory reporting requirement would drive better outcomes for consumers
• consider the case for introducing rules to require creditors to report to courts when a County Court Judgement (CCJ) has been satisfied or partially satisfied, to drive up the quality of existing credit information
• identify and address barriers to widespread use of Open Banking data, with particular attention to alternative credit providers”

The market study does not look at most of these questions (except the third and fourth) in any detail.

Based on our consultation with FinTech firms - innovators in consumer lending and credit as well as providers of alternative credit information and tools to enable people to build their credit files, we would highlight:

• CRA assessments provide a limited ‘rear view mirror’ of people’s credit worthiness. It does not provide a dynamic picture of affordability and cashflow. This was clear during the COVID-19 pandemic when financial circumstances changed dramatically and during the current cost of living crisis. More generally, the credit rating model increasingly fails to reflect an economy where people are on short-term contracts, self-employed or with a variety of income streams - where income patterns are not consistent or past credit history may not reflect current or future likely performance. Whilst the credit rating model may have helped widen access to credit in the past, it now acts to exclude some from credit they can afford as well as providing credit for those who can not afford it.
• At least one member highlighted problems of inconsistent data from CRAs and suggested that in some cases, inconsistent data had led them to lend to customers they might otherwise not have, including some scams.
• The so-called ‘reciprocity' model is tipped against smaller credit information users (CIUs). Only large banks have the clout to negotiate on equal terms with the CRAs. “Reciprocity” is something of a misnomer - it involves a CIU providing data to the CRA for free and in return being able to pay for credit information from the CRA. The CIU incurs the cost of providing data and then the cost of buying back data. As the FCA market study concludes, larger CIUs have much greater buying power with CRAs than smaller CIUs. The smaller CIUs - often innovative credit providers - face disproportionately greater costs in providing data to CRAs and greater costs in buying back data from CRAs.
• This also means that if a CIU shares with a CRA with whom they don't have a “reciprocal” arrangement (i.e. a contract with the CRA to pay for data back), then in effect they are providing their data to the market but not getting the market’s data back in return. This could give their competitors an advantage.
• For many innovative providers - such as Buy Now Pay Later (BNPL) - the CRA product itself is not appropriate. It is better suited to large purchases or revolving credit and not to small, individual purchases.
• Open Banking is already providing alternatives to established CRAs and the extension of Open Banking to a wider range of products, including all consumer credit products and mortgages, would enable enhanced alternatives to established CRA services.
• Experience of engaging with the CRAs and the Steering Committee on Reciprocity (SCOR) on developing appropriate approaches to new credit products indicates that the governance and market is very slow and inflexible in adapting to change. This mirrors the observations of the Woolard Review: “Lenders and Credit Reference Agencies (CRAs) were unable to quickly provide a consistent approach to reporting short-term forbearance that has no long-term negative impact on credit files. This raises wider questions about the ability of the credit information market to operate at pace and deliver change in the interests of firms and consumers.” Challenger FinTechs do not have a seat at the SCOR table (nor do their trade associations, like Innovate Finance) and CRAs have yet to develop products that provide timely, appropriate solutions to issues like consumer ‘stacking’ in the BNPL market.
• The experience of our members and ourselves at Innovate Finance in trying to engage on new products is that the governance of the UK credit information market needs much more radical reform and a totally new approach is needed to oversee the market. The ‘reciprocity’ approach no longer works; the unequal relationship between large players and smaller users means that the way reciprocity is working is not balanced or equal.
• The Credit Information Market is increasingly a fundamental part of economic and social infrastructure. As the Woolard Review observed: “The credit information market clearly also has an impact on consumer outcomes, even when this is mediated through lenders… the credit information market must play a role in delivering the right outcomes in healthy credit markets. However, it is not clear that a market driven solely by commercial interests would deliver those outcomes. Regulators have a vital role in identifying how credit information can support a healthy credit market and driving forward a strategy which delivers this.“

• With living standards falling and economic shocks like the pandemic, credit information performs a critical role in the life outcomes for every citizen of the UK. This needs to be recognised in the approach, with public policy driving better oversight of economic and social impact.

Challenger credit bureaus are already utilising Open Banking data, to provide creditworthiness and affordability solutions based on intelligent transaction analysis, and offer an alternative data source that provides more accurate assessments of people’s current circumstances. Some have also developed solutions that enable a consumer’s BNPL obligations to be visible to other lenders, without the need for a “hard” search to take place, and enables them to build their credit scores through proven repayment history.

What should we work towards?

We need to develop a market that:

• Helps customers build credit files;
• Provides better, accurate real time information;
• Provides for comprehensive data sharing so any provider can access accurate information and has a clear picture on the customers aggregate credit/debt;
• Supports innovation to achieve these aims; and
• Is affordable for all new entrants and innovative service providers and CIUs of all sizes (particularly smaller CIUs).

Principles for future state

To achieve this we would suggest the following principles:

• Credit information should be recognised and treated as a utility, providing an essential public service or infrastructure that underpins many elements of our economy and society. Like other utilities, this needs to be regulated appropriately to ensure the market delivers desired public good and economic outcomes.
• In principle, greater requirements for sharing credit information are needed, to ensure, for example, that all credit providers have visibility of a customer’s full credit history. But more fundamental reform of the market and governance is needed before this can work. Mandating credit sharing now will create significant cost to users and consolidate the position of a few dormant players.
• We need much greater diversity of provision and diversity of credit information models. Competition and innovation is needed to drive cost and productivity improvements, more accurate risk assessments for CIUs, and better outcomes for citizens. This should include models based on smart data - including Open Banking and Open Finance - and ones that can support smart contracts in future.
• Our members have also raised concerns that the current model has inherent conflicts of interest, with CRAs not only gathering and selling data but also selling credit cards to consumers to improve their credit score.
• In terms of governance, this calls for an approach that (a) better oversees outcomes (competition, cost, consumer outcome and prudential risk) rather than inputs and (b) embraces a wider group of CRAs and credit information providers and actively promotes new entrants.
• This calls for a new approach that moves away from the so-called “reciprocity” model and its conflicts of interest. Options need to be explored. Our members in the main favour moving towards a regulated market (with outcomes-based regulation). Some have also suggested a new independent, national not-for-profit Credit Information Bureau (a single body to which data is reported). There may also be a hybrid that combines both models. The FCA should consult on these alternative approaches.

Designing a future model

In order to work toward this, we recommend further work by the FCA and HM Treasury to explore alternative models. This might include:

• The establishment of a National Credit Information Bureau which is the approach taken in Norway, the Netherlands, Portugal, Ireland and Poland and one that is being considered in the United States; and
• A regulatory model where credit information becomes a regulated activity, overseen by the FCA, and with Consumer Duty and risk outcome requirements. This could include regulations that require financial institutions to share data with all credit bureaus and not just the incumbents (e.g. as in many jurisdictions across Asia), but it should not rule out alternative models that use different information sources (e.g. smart data solutions). Singapore is a good example of a regulated CRA market. An outcome-based regulatory approach would enable new models of credit information.

There is an opportunity in the UK to develop a world-class approach. The UK is a leading country in terms of depth and intelligence of data. Reform of governance and oversight could set a high standard of consumer outcomes and credit decisioning.

This also needs to take account of the FCA’s work on “Big Tech” competition in financial services, not least as the use of behavioural data and wider data sets in credit decisioning and information. Any future model should allow for new entrants, including Big Tech, whilst also building any necessary competition safeguards.

The long-term shape of the market should also factor in developments such as reusable Digital ID and the extension of Open Finance to all credit products, which may enable the portability of credit data and credit ratings by individual consumers and improve quality of data by matching new credit information to individuals.

Intermediate Steps

We also recommend a number of shorter term steps that can be implemented now:

• The FCA and HM Treasury should engage with other Government departments on opening access to public data that can support credit information. The Woolard Review noted that “Open Banking isn’t the only potential alternative information source to traditional CRAs. They suggested a number of datasets which could help lenders make more accurate lending decisions, including Her Majesty's Revenue and Customs (HMRC) data, Department of Work and Pensions (DWP) benefits data or council tax or student loan payment history. However, there is currently no plan or provision to allow lenders access to these datasets and it would require the creation of new information channels.“

Action is needed to support better information sharing in the BNPL market. The recent HM Treasury consultation on BNPL regulation sets out the Government's view that BNPL providers should in future report BNPL credit agreements, to all three main credit reference agencies. This would compound existing problems in the credit information market. As the FCA market study shows, many CIUs (including 40% of large CIUs) do not have “reciprocal” agreements with all three CRAs. Expecting all BNPL providers to share information with all three main CRAs is not practical, proportionate or affordable under current market arrangements. CRAs have yet to develop products that provide suitable solutions for BNPL providers and their customers. A task and finish group with the FCA, HM Treasury, alternative credit information providers and CRAs should be established to identify and implement a solution that has proportionate costs, achieves good outcomes for consumers and ensures full visibility of aggregate credit in affordability assessments.

• Any body or group, to take forward industry and societal engagement and action on developing future arrangements, must be a separate, new build - not an extension or reform of existing governance. It should also be independent with wider representation.

• Managing a transition: We recognise that such a change in the market will require a smooth transition, that the effective functioning of current CRA services will be important during this, and that in any future market existing CRAs may play a significant role and indeed may be able to innovate and expand their own services. As noted, we do not consider that current governance arrangements are conducive to reform and should not be the vehicle for developing new market arrangements. However, the current governance could - if reformed - provide a short-term basis for some limited transitional arrangements, particularly to ensure continuity of services (i.e. managing ‘legacy’ and current systems rather than building new arrangements). In the short-term, and to enable an industry-wide move towards a future state, the FCA might require an industry organisation that brings together different market players (including CRAs), with an independent chair and board, representation from consumer groups and alternative credit information providers, and with a fair and open funding model. If such a body is needed, it should have a very tightly defined ‘legacy’ remit and a time-limited existence to manage transition and it should not have a role in developing the new market arrangements. If this is not achieved in 6 months, the FCA should establish its own forum.

• Access to granular current account turnover (CATO) data should be made available to non-personal current account (PCA) providers, as proposed in the market study.

• Extend Open Banking to include all credit and mortgages, enabling the further development of Open Finance based credit risk assessments. Our members believe that Open Finance and mandatory reporting (provided this is part of a wider reform of the market, and avoids the risks of mandatory reporting to an oligopoly of CRAs) are

prerequisites for innovation and enhanced competition. This could give firms and CIUs a more holistic view of customers’ financial situation and could enable firms to offer customers products that fit their needs at fair value, provide the right information in a clear and transparent way that considers potential vulnerabilities, and ensure responsive, accessible and appropriate customer support.

Questions and responses

Remedy 1: Industry Governance Reform

Question 1: Do you agree that there is a need for a new credit reporting governance body with broader objectives that is more inclusive, transparent and accountable?

Industry governance reform is insufficient. Credit information provides critical economic and social infrastructure and should be overseen by a regulator or a National Credit Information Bureau - and not by an industry body such as SCOR. We believe that the credit reporting governance body should be replaced with a new model based on an economic regulator role and outcomes-based regulation and/or a National Credit Information Bureau, to ensure fair access and wider social and economic outcomes.

Any new credit reporting governance body should be a brand new organisation, not a reformed or revamped version of existing arrangements.

We recognise that such a change in the market will require a smooth transition, that the effective functioning of current CRA services will be important during this, and that in any future market, existing CRAs may play a significant role and indeed may be able to innovate and expand their own services. As noted, we do not consider that current governance arrangements are conducive to reform and should not be the vehicle for developing new market arrangements. However, the current governance could - if reformed - provide a short-term basis for some limited transitional arrangements, particularly to ensure continuity of services (i.e. managing ‘legacy’ and current systems rather than building new arrangements). In the-short term, and to enable an industry wide move towards a future state, the FCA might require an industry organisation that brings together different market players (including CRAs), with an independent chair and board, representation from consumer groups and alternative credit information providers, and with a fair and open funding model. If such a body is needed, it should have a very tightly defined ‘legacy’ remit and a time-limited existence to manage transition and it should not have a role in developing the new market arrangements. If this is not achieved in 6 months, the FCA should establish its own forum.

Question 2: Do you agree that a new credit reporting governance body could be effectively designed and implemented through voluntary industry-led change?

No. The asymmetry of market power means that voluntary arrangements are inappropriate. Instead, this needs to be a change led by the Government or regulators.

Reform of industry governance arrangements needs to be instigated via new robust outcomes-based regulation, potentially based on the principles of Open Data, which may only be effectively overseen by an established regulator.

Question 3: Do you agree with the potential ‘blueprint’ for the new industry body?

No. The ‘blueprint’ is too slow and too limited. A faster, more radical reshaping is needed, with fundamental reform to ensure trust and to provide a competitive, innovative market that delivers better outcomes for the economy and society.

As noted above, Industry governance reform is insufficient. Credit information provides critical economic and social infrastructure and should be overseen by a regulator or a National Credit Information Bureau - and not by an industry body. We believe that the credit reporting governance body should be replaced with a new model based on an economic regulator role and outcomes-based regulation or a National Credit Information Bureau, to ensure fair access and wider social and economic outcomes.

Question 4: Do you agree that funding and resources for the new industry body should be a matter for industry to determine and provide?

No. Funding is a critical component of ensuring independence of operations and appointments. This is a critical part of the UK national economic infrastructure and we would therefore argue that central Government funding is most appropriate - or a general centrally collected levy across industry which accounts for usage / revenues derived from the market and size of firm.

Question 5: Please indicate if there are any alternative ways that you think such a body could be made more representative, transparent and accountable.

As indicated above, the current market arrangements, based on a so-called ‘reciprocity’ model dominated by an oligopoly of providers, needs to be fundamentally replaced. A regulated market or a National Credit Information Bureau may be a better approach, in which case an industry governance body may be unnecessary.

If there is a need for an industry body, it should be established from scratch with oversight by an appropriate regulator. This needs to be independent, with independent appointments, and include retention of alternative credit information providers, a wider group of users, and consumer and financial inclusion groups. Independence also calls for public funding or a fair levy based funding model. Membership should include: consumers and consumer groups, financial inclusion organisations, challenger credit bureaus, CIUs including BNPL providers, alternative lenders and representatives from start-up and FinTech associations.

Remedy 2A: Mandatory data sharing with CRAs

Question 6: Do you agree with the principle of a mandatory reporting requirement to certain designated CRAs to establish a ‘core’ consumer credit information dataset?

In principle, mandatory reporting should ensure CIUs have access to full information. But introducing this in the current market, without changing the fundamental model, risks maintaining and entrenching the existing oligopoly. There should be no mandatory reporting until more fundamental reforms are made to ensure a more diverse and competitive market. Mandatory reporting needs to be accompanied by either (a) a National Credit Information Bureau and/or (b) regulation of credit information providers, with a new outcomes-based regulatory approach that recognises any service that meets minimum outcome standards.

These alternative models need to be explored further and assessed in terms of competition, innovation and consumer outcomes. On balance, our members favour an outcome-based regulatory approach, one that would enable new providers including approaches based on Open Finance and Open Data. We recognise that this might require some form of single, national bureau to receive data and which would then be accessible by credit information service providers and rating agencies. More work is needed to explore these models, with the aim of an approach that enables consumers and CIUs to safely and securely benefit from third-party providers of high-quality, trustworthy and predictive credit information in line with a modern credit market.

We would also like to express serious concerns about attempts to require mandatory reporting in specific sectors of the market, in the absence of wider reform. The recent HM Treasury consultation on BNPL regulation sets out the Government's view that BNPL providers should in future report BNPL credit agreements, to all three main CRAs. This would compound existing problems in the credit information market. As the FCA market study shows, many CIUs (including 40% of large CIUs) do not have “reciprocal” agreements with all three CRAs. Expecting all BNPL providers to share information with all three main CRAs is not practical, proportionate or affordable under current market arrangements.

CRAs have yet to develop products that provide suitable solutions for BNPL providers and their customers. The reporting lags and the weight given to 'hard searches' in CRA products do not work for BNPL. BNPL requires credit information with a short reporting timeframe and timely information and which requires multi consumer searches in any given period given the frequency of use.

The Woolard Review (reflecting a broad consensus) concluded that the most likely potential cause of consumer harm in the BNPL market may come from the potential for customers to participate in ‘loan stacking’, where they might secure credit from a number of BNPL providers at the same time, building up an aggregate amount of credit that is inappropriate for them. Solutions to ‘loan stacking’ require real time sharing of information between BNPL providers. CRAs do not currently offer a solution to this. Mandatory reporting to the three largest CRAs by BNPL providers will not therefore, on its own, address this issue. CRAs need to develop new systems - and alternative providers need to be enabled to provide such solutions - that allow all lenders to share their data in real time (in practice, probably powered by Open Banking technology). Requiring mandatory reporting by BNPL to all three main CRAs will sadly fail to achieve the desired consumer outcomes and will distract from developing meaningful solutions.

A task and finish group with FCA, HM Treasury, alternative credit information providers and CRAs should be established to identify and implement a solution that has proportionate costs, achieves good outcomes for consumers and ensures full visibility of aggregate credit in affordability assessments.

Question 7: Do you agree in principle with the proposal to establish a CRA designation framework?

This will only work if it is part of wider reform that opens up the market and is regulated by an independent economic regulator.

Introducing this in the current market, without changing the fundamental model, risks maintaining and entrenching the existing oligopoly. A CRA designation framework may be beneficial if it is broad enough to support designation of a wide range of providers and is accompanied by an outcomes-based regulatory system and is proportionate and avoids burdensome costs on alternative providers..

Question 9: What might the competition implications be if only a small number of CRAs become designated CRAs?

This would further entrench the existing oligopoly, entrenching an uncompetitive market, high costs for users and little incentive for innovation.

Question 10: Do you have views on the possible costs and benefits of including a broader range of CRAs within a designation scheme?

A CRA designation framework may be beneficial if it is broad enough to support designation of a wide range of providers and is accompanied by an outcomes-based regulatory system and is proportionate and avoids burdensome costs on alternative providers.

Question 11: Do you have views on which types of regulated activity should be subject to a mandatory reporting requirement and on the further options set out above on scope?

This should cover all forms of credit. It should allow for more innovative credit information and decisioning tools including those using Open Banking.

Question 12: Do you think it would be appropriate to introduce ‘de minimis’ reporting thresholds, if so how should these be defined?

Yes, it will be appropriate to introduce ‘de minimis’ reporting thresholds. This can be applied to cases where only a small amount of credit is extended for a limited period of time. Considering the fact that consumer protection is at the heart of our members’ operations and a priority to regulators, our members suggest that the ‘de minimis’ threshold ceases to apply when consumers reach a certain level of credit exposure with a lender such as when they have taken out many small credit agreements that reach a cumulative amount. In this instance, reporting more widely would be reasonable.

Question 13: Do you think designated CRAs should be prevented from levying direct charges to receive data under a mandatory reporting requirement?

Yes, designated CRAs should be prevented from levying direct charges to receive data under a mandatory reporting requirement. Levying direct charges disincentivises sharing. The market model needs to shift to one based on open access to data, where service providers compete based on service offering, innovation and cost to users of the data.

As noted above, introducing mandatory reporting in the current market, without changing the fundamental model, risks maintaining and entrenching the existing oligopoly. There should be no mandatory reporting until more fundamental reforms are made to ensure a more diverse and competitive market.

Question 14: Do you agree that firms should be left to decide whether to share full or negative only credit information under a mandatory reporting requirement?

Firms should be left to decide themselves whether to share full or negative only credit information under a mandatory reporting requirement. Mandatory reporting has its merits in terms of improving data coverage across CRAs, but it risks inadvertently causing financial exclusion in an era where financial circumstances can change dramatically as evidenced during the COVID-19 pandemic and in the midst of the cost of living crisis. Essentially, if data is analysed without nuance, assessments will only provide a limited ‘rear view mirror’ of people’s credit worthiness where a dynamic picture of affordability and cash flow will be absent.

Question 15: To what extent do you think the FCA should prescribe the type of information to be shared with designated CRAs under a mandatory reporting requirement?

See response to Question 14.

Question 17: Please provide evidence on the additional costs that might be incurred from mandatory data sharing, separately identifying any one-off and ongoing costs, and on the possible benefits that would result.

One of our members has estimated the costs of mandatory reporting to the three main CRAs on their business to be:

• Initial set up costs around £250,000; and
• Ongoing costs around £1.07m annually

This estimate excludes any fees levied by the three main CRAs to report data.

Other firms may face larger or smaller costs, depending on their business model. This illustrates that this is a material cost to credit providers.

Remedy 3B: Single portal - access to statutory credit file

Question 34: Do you agree in principle that a single portal could help consumers to access and engage with their credit information?

Yes if the reforms we have proposed above are introduced and if this is part of an Open Data enabled solution.

Remedy 4B: Updated data access arrangements (PoR)

Question 51: Do you think that the underlying principle of reciprocity would remain relevant and appropriate where credit information is provided to designated CRAs under a mandatory reporting requirement?

The reciprocity model is not fit for purpose. The ‘reciprocity’ approach no longer works; the unequal relationship between large players and smaller users means that the way reciprocity is working is neither balanced nor equal. CRAs have disproportionate power in the relationship. As noted above, the current market arrangements, based on a ‘reciprocity’ model dominated by an oligopoly of providers, needs to be fundamentally replaced. An outcomes-based regulated market or a National Credit Information Bureau may be a better approach.

Question 52: Do you agree with our suggested approach of encouraging industry to consider this issue with input from all relevant stakeholders?

We are sceptical that an industry-led approach will allow for a consensus model agreed by all parties and that acts in a way that supports new entrants.

Remedy 4C: Updated data access arrangements (CATO)

Question 53: Do you agree that granular CATO data should be made available to non-PCA providers? What implications might this have?

We agree that more effective assessment of affordability by more lenders could be achieved if access to granular CATO data were made available to non-personal current account (PCA) providers.

We would encourage this to be considered in ways that build on Open Banking and ultimately an Open Data sharing approach may be the optimal model for better credit information outcomes.

[ENDS]