FCA Credit File Data Reforms Could Be Useful For Insurers

The FCA rcently laid out new proposals to give lenders access to more comprehensive information to support lending decisions by closing gaps in borrowers’ credit files and ensuring these more accurately reflect people’s financial circumstances. This is good thinking as understanding the customer’s true financial position at the point of quote is crucial for insurers. Debts and CCJs suggest a higher chance of claims, a more chaotic lifestyle perhaps, or some sort of coercion going on in the background. 

Getting a 360 degree view on credit and solvency as regards consumers is very useful, so the FCA changes on reducing `blind spots’ can only be good news. Here’s some comment from Broadstone;

Richard Pinch, Senior Director of Risk at independent financial services consultancy Broadstone, in their Banking & Capital Advisory division, commented:

“Ensuring lenders have access to more complete and consistent credit data is a logical and welcome step, as high-quality information sits at the heart of both prudent lending and good consumer outcomes. Requiring firms to share data with all designated credit reference agencies should help reduce blind spots in credit files, improve risk assessment and support more accurate pricing and affordability checks.

“For lenders, however, the proposals will mean reviewing operational processes to ensure they can comply on a consistent basis. There will also be a focus on data quality as more comprehensive reporting will increase the visibility of any gaps or inaccuracies.

“If implemented effectively, the reforms have the potential to widen access to credit for consumers, particularly for those whose financial positions are not currently fully reflected in their records. Borrowers could benefit from increased competition in retail lending markets which could feed through into increased choice and potentially more attractive pricing while strengthening safeguards against over-indebtedness.

“The consultation will be an important opportunity for firms to engage on the practicalities, proportionality and implementation timelines to ensure the new framework delivers the intended benefits across the market.”

https://www.fca.org.uk/news/press-releases/fca-proposes-action-close-gaps-borrowers-credit-files