Real-time data for payday lenders

Updated: 

File photo dated 16/12/12 of the website of payday loan company Wonga, as payday loan firm is to start using a new

Payday loan firms including Wonga are to start using a new "real-time" information sharing service about consumers' borrowing habits to help them to improve their lending decisions.

The new service is being launched by credit reference agency Callcredit to tackle concerns that lenders should have the most up-to-date and accurate snapshot of a potential borrower's circumstances when they make a loan request.

The agency said the initiative will have a "major positive impact for both lenders and consumers".

The move comes after the Business, Innovation and Skills (BIS) Committee called in December for better sharing of up-to-date information between payday firms so they can stop struggling borrowers from spiralling into further trouble by taking out multiple loans with different lenders.

If payday lenders do not establish better ways to quickly share such information by July, regulator the Financial Conduct Authority (FCA), which will oversee the payday loan industry from April, should mandate this as a condition of trading in the sector, the committee said.

Lenders will begin testing the system in April, with the aim of it being used to help enable more accurate lending decisions from early May.

Callcredit's real-time initiative will run alongside its existing monthly reporting service.

The new service aims to plug an information gap by giving a more timely assessment about credit risk, affordability and the risk of fraud associated with new lending applications. It will include information such as whether payments have been received as expected, any rollovers to loans and and extensions to credit or changes to payment terms.

Callcredit said that although much interest in the initiative has come from short-term payday lenders, it will not just benefit this sector and there has also been an appetite for it from the "mainstream" lending industry.

Any lender that contributes to the initiative will be able to access it and consumers will also be able to see it included in credit reports.

Callcredit said that any solution that just concentrated on the payday loans industry alone would not get to the root of the issue as customers in the UK tend to also have other forms of debt.

Wonga's head of decision science, Rael Sarembock, said: "Wonga is a business built on the intelligent use of quality data to make accurate and responsible lending decisions.

"As a long-term partner of Callcredit, we welcome their real-time data-sharing initiative and anticipate that it will assist in further improving our decision-making processes.

"Wonga will begin including information from Callcredit's real-time data-sharing initiative once it goes live as part of the comprehensive suite of data we already use in every loan decision."

Wonga said that given the importance of having an accurate and up-to-date picture of someone's borrowing history, it hopes the initiative will be adopted beyond the short-term credit sector and across
all UK consumer financial services.

Peter Mansfield, managing director of Callcredit Limited, said: "The lending landscape has changed considerably over recent years.

"There is a growing consensus that the availability of more frequent data-sharing is required to ensure responsible lending in certain sectors."

The whole payday lending industry is being investigated by the Competition Commission following concerns raised that some lenders appear to have been basing their business models around borrowers who cannot afford to pay back their loans on time.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents short-term lenders, said: "The CFA supports an industry-led solution and there will be some CFA members among the early adopters of Callcredit's model."

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