The government should share more data on personal debt with credit reference agencies to help short-term credit providers make better decisions, the Association of British Credit Unions (ABCU) has warned.
Mark Lyonette, chief executive of the ABCU, told a parliamentary committee that there was a “paucity of information” on borrowers on low incomes, with information worsening on borrowers at the bottom of the pay scale.
“We have been lobbying over the paucity of information from credit reference agencies, particularly among those further down the income scale,” Lyonette told the Department of Business, Innovation and Skills (BIS) committee.
“The government needs to consider whether it contributes more debt data to reference agencies. It is very helpful for example, to see people who keep paying rent to the housing association, and it would be really quite helpful to make sure we’re not indebting people who cannot afford to repay, so there is a part of this around helping the industry to make better decisions.”
His comments came during a debate on the level of data sought by short-term credit providers to avoid putting non-credit worthy borrowers at risk of falling into a “debt spiral”.
Speaking at the same hearing John Lamidey, chief executive of the Consumer Finance Association (CFA), a trade body for payday lenders, added that credit reference agency data was often not updated regularly enough to provide a sufficient assessment for a short-term loan.
Therefore, he said, payday lenders were turning towards real-time data providers to provide better credit scoring.
“One of the difficulties we have had with credit reference agencies is that their data is built up on mainstream lending and in many cases is updated on a monthly basis,” he said. “This is no good to us as a month is often the entire duration of our loans.”
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