Credit card companies have agreed a framework for sharing data on their customers’ spending and repayments, in order to improve how they assess customers’ creditworthiness.
Starting this December, five credit card issuers - Barclaycard, Capital One, GE Money, HBOS and MBNA - will begin sharing data available from credit reference agencies, under the new initiative announced by UK payments association APACS. Other APACS members, including Abbey, Alliance & Leicester, HSBC and Lloyds TSB have committed to join the initiative at a later date but have not yet announced how they will link in their IT systems.
Traditionally, banks share data on customer balances, their credit limits and whether repayments are up-to-date. But under the new scheme, information will be shared via credit reference agencies, and is also expected to offer firms more visibility into how customers use their credit cards, so that they can lend accordingly. This would include data on the amount of customers’ last payments compared to the minimum payment, changes to credit limits, the extent to which customers withdraw cash, and if the customer is signed up to any promotional deals.
Details on the technology platform involved are not yet known. APACS directed all questions on the technology to the credit reference agencies. Equifax, one of the main credit reference agencies, declined to comment on the systems, and Experian had not responded to a request for comment at the time of writing.
The project is driven by political demands for responsible lending practices. APACS said the new data would help credit card companies identify customers who are in financial difficulty and that this would help banks lend more responsibly.
“The holy grail for credit card companies is to have access to data that could predict a customer’s future ability to repay,” said Paul Rodford, head of card payments at APACS.
"This new data relates to how customers manage their accounts and will enable lenders to intervene, at an earlier stage, for those showing signs of debt stress and ensuring that those already struggling are not given further credit."
Peter Tutton, senior policy officer at Citizens Advice, called it an “important enhancement to data sharing” and urged banks to make good use of the information to help identify customers in financial trouble.