17. Memorandum submitted by
the Finance & Leasing Association
INQUIRY INTO IDENTITY CARDS
The Finance & Leasing Association (FLA)
is the leading UK representative body for the consumer credit,
motor finance and asset finance industry. Our full members provide
finance to business, consumer credit, point of sale, credit card
and instalment finance. Our associate members provide services
or goods to those industries and support the Association's vision.
FLA members achieved £83 billion of new
business in 2002. Of this £25 billion was provided to the
business sector, representing 27.2% of all fixed capital investment
in the UK in 2002. The remaining £58 billion was credit granted
to private individuals, representing 28.5% of all consumer credit
in the UK last year.
In the consumer credit sector, members provide
hire purchase, conditional sale, unsecured and secured personal
loans, revolving credit and credit card facilities, as well as
deposit and combined deposit/current accounts. In the business
sector, members provide asset finance and leasing to businesses,
including sole traders and unincorporated partnerships, which
are treated as "consumers" for the purposes of UK consumer
credit legislation.
This submission to the Home Affairs Committee
Inquiry builds on our response of March 2003 to the Government's
Consultation Paper on Identity Cards.
1. OVERALL COMMENTS
1.1 We support the introduction of identity
cards. Currently, there is no reliable universal form of identity
or address verification database in the UK. The various databases
which have been developed over time for specific purposes in the
UK have led to a patchwork of information about individuals making
it difficult to implement not only positive initiatives by Government
and businesses to tackle fraud and identity theft but wider public
policy objectives and business requirements. Certainly there is
a balance that has to be struck between protecting the privacy
rights and liberties of the individual against the legitimate
public policy concerns of Government.
1.2 We agree that individuals should be
able to readily easily and reliably verify their identity and
that the requirement to do so is rightly linked to their requirements
for services so that they can prove their "identity".
We strongly support the proposition that the implementation of
an identity card should have two functional elements; the card
itself and a related centralised database holding core information.
The former should be available for individuals to use and present.
The database should be available for all legitimate users of information
to access either directly or indirectly to facilitate the uses
of the card which an individual may make.
2. OPERATIONAL
ISSUES
2.1 Lenders have considerable experience
of the difficulties in establishing verifying and identifying
individuals. Such a requirement is fundamental to this industry
both from a commercial and compliance point of view.
2.2 A basic requirement for lenders in considering
applications from individuals for credit and other forms of financial
services including bank accounts is that the identity and address
information of that individual can be readily and reliably verified.
Protecting themselves and their customers from fraud, preventing
money laundering and ensuring that credit and other facilities
are extended responsibly by business are all underpinned by this
fundamental requirement. Until the Government proposals on Identity
Cards were published, there appeared to be little coherent policy
in this area. The disparate array of data sources, lack of data
quality and the real problem of fraud and identity theft is a
cause for serious concern for individuals about the use of their
personal information. Such concerns have had a seemingly disproportionate
effect on restricting legitimate uses of data and related legislation
and policy.
The verification of identity is the first basic
check undertaken by a credit provider. Duration and stability
of residential address can also lend weight to an application
for credit just as it could support the wider purposes of the
identity card scheme.
2.4 In our view the importance of verifying
the identity of individuals has been undermined by threats to
the uses of data sources such as the electoral register at a time
when the preservation of the only data source of its kind in the
UK should, if anything, be bolstered.
2.5 Lenders, banks and other service providers
have developed databases via credit reference agencies to responsibly
assess applications for credit. These systems are based on the
principle of reciprocal data-sharing and are underpinned by electoral
roll information which has to be laboriously manually collated
and converted into electronic format from the hundreds of different
local registers.
2.6 The Department for Work and Pensions,
the police and other public sector bodies all use the database
which has been developed by those providing financial services.
3. OPTIONS FOR
AN IDENTITY
CARD SCHEME
We agree with the principle of establishing
an identity card scheme. Overall whilst it is accepted that there
may be a variety of differing features to the cards either linked
to benefit entitlement or carrying details of entitlement to drive,
we believe the objective should be to develop a centralized scheme
which joins up existing data sources such as electoral roll information,
births and deaths registers, the passport database and other relevant
information. It should be emphasised that any proof of identification
is only as good as the information supplied on an individual.
On this basis, we could not support inclusion, for example, of
national insurance and driving licence data on identity cards
until we had sufficient faith in the checking and security procedures
of the Inland Revenue and DVLA. Equally, there is an element of
overlap where different Government Departments unnecessarily re-verify
data which has come from the same source ie the credit reference
agencies.
Information could be grouped into categories
relating to the type of information collected and those who can
access it. Such permitted users would have the responsibility
for maintaining the relevant tranche of the database and where
appropriate the core information such as name and address. It
would be sensible for credit reference agencies to have access
to the centralized database because as outlined above, lenders
use them when assessing a credit application.
It would be necessary for the individual who
owned the card to be able to read the information readily themselves.
However, it is essential that any other person reading the information
on the card should be restricted to only reading information that
they would have a need to see. This would therefore necessitate
some way of splitting up whatever information appeared on the
card, for example, medical records, criminal records or address
details.
We would urge a note of caution on the proposal
in the Government's paper for a biometric passport: in order to
obtain a biometric passport one would need to first prove one's
identity using existing documentation. If criminals obtain a passport
with a false name but a "genuine" iris scan, this will
lend legitimacy to their fraudulent activity.
The key to the success of the scheme would appear
to be that the cards had sufficient status and practical use.
Individuals should be compelled to use the card in order to use
services and products and not because the cards themselves were
mandatory. If the card were developed with support from the credit
and financial service industry the status of the card would be
considerably enhanced. An identity card could also assist the
financially excluded to access mainstream financial services.
Currently due to the information sources available, the main one
being the electoral roll, individuals may find it difficult to
access these services.
Many individuals do not have access to other
documents which could potentially be used to verify address or
identity. Alternative "proofs" such as utility bills,
bank statements and driving licences are less reliable. If the
identity card was available for applications then it will be open
to all wishing to access financial services either at the point
of sale or remotely to do so. The key advantage is that the core
information on the identity card could be free-standing in that
it will not relate or be based on other benefits or services which
an individual has already acquired.
There would be potentially a number of other
benefits for the scheme if there were reciprocity arrangements
between those lenders and suppliers of financial services and
the central database. To ensure that accuracy of the central database
is maintained to a high standard, contributors must have regular
contact with the individual. Often individuals will inform their
credit provider or bank of a change of address or name change
before they tell other Government bodies such as the DVLA. There
are also requirements and anti-fraud and money laundering checks
in place to ensure that the information provided by an applicant
for credit is accurate. No such verification takes place in relation
to, for example, the registered keeper of a vehicle at the DVLA.
FLA would be pleased to contribute further to
the Committee's Inquiry. Please contact Edward Simpson (mailto:edward.simpson@fla.org.uk)
if the Committee wishes to consider our submission in more detail.
January 2004
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