City regulator probing competition between credit reference agencies

Concerns about the effectiveness of competition between credit reference agencies and the quality of information held are to be investigated by the City regulator.

The Financial Conduct Authority (FCA) has launched a study of how the credit information market operates and the impact it has on consumers.

Credit information can affect how likely people are to be offered products such as loans, mortgages and credit cards – as well what rate they may pay.

Lenders use the information when assessing how “risky” a loan may be and the extent to which a potential borrower can afford to pay it back.

Nearly four in five adults hold at least one credit or loan product.

Vulnerable customers for whom a lender’s decision is more finely balanced are most likely to be affected if the credit information market is not working well, the FCA said.

The study will focus on firms’ business models and competition as well as the purpose, quality and accessibility of credit information.

It will also consider how well consumers engage with and understand credit information and the impact on their behaviour.

The FCA will look at how credit information markets work in other countries and what the UK market might learn from them.

Christopher Woolard, director of strategy and competition at the FCA, said: “We have launched this market study as we have identified concerns about the coverage and quality of credit information, the effectiveness of competition between credit reference agencies, and the extent of consumer engagement.

“Through the study we will seek to get a better understanding of how this vital market works and will identify remedies, where appropriate, to make it work more effectively for credit information users and individual consumers.

“This includes considering whether vulnerable customers are disproportionately affected by the way credit information is used, and whether any alternative approaches might deliver better outcomes for consumers.”

The FCA will report on its preliminary conclusions in spring 2020 including, if appropriate, a discussion of potential remedies.

It is not formally consulting on the terms of reference, but said it welcomes any views by the end of July.

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