Examination of Witnesses (Questions 200-219)
MR ERIC
DANIELS, MR
JAMES CROSBY
AND MR
FERGUS BROWNLEE
19 OCTOBER 2004
Q200 John Mann: Before that, who else
does not share full information?
Mr Daniels: I have no idea.
Q201 John Mann: If you have no idea,
how can you possibly do any credit checking that is valid?
Mr Daniels: If I may, may I change
the question slightly?
Q202 John Mann: No, because I want to
keep on this question. Let me give an example because it is fortuitous
that the three of you are here. I wrote to you via APACS on 24
September about one of my constituents and, Mr Daniels, you have
very kindly responded—thank you. Mr Crosby, you have kindly
responded—thank you. Mr Brownlee, I am sure yours is in
the post. This constituent has never worked, ever, in the 10 years
since leaving school but you have all given my constituent a credit
card. On what basis did you make that decision, and did you share
the information between you in relation to that? Indeed, could
you share any information between yourselves in relation to that?
Mr Crosby: Certainly in an instance
like that because we share positive and negative data we would
have shared any information on a reciprocity basis with any bank
that had sought it.
Q203 John Mann: And you do the same,
Mr Brownlee?
Mr Brownlee: We supply all information
all the time. It is in our interest.
Q204 John Mann: So how come between the
two of you your institution did not manage to pick up that my
constituent had no income, has had no income, and yet manages
to get a fairly decent credit line from the three of you, plus
one of your other competitors, so four credit cards? What is wrong
with the system?
Mr Brownlee: I understand we cannot
name names but I am guessing the individual and we have obviously
been looking at that case. There was an income and the income
was £8,400 a year stated by that individual on their application
form, which we believed, and the credit that we gave that individual
was after due consideration with all other information that was
available at that time, and was well managed by that individual
for upwards of a year. It was a low credit limit; it was £400.
Since that point about three or four years ago when it started,
the individual's account has gone into—
Q205 John Mann: My question is about
you sharing information with Mr Crosby or Mr Daniels or institutions.
Mr Brownlee: Well, it is shared
through agencies.
Q206 John Mann: But it is not working,
is it? Mr Crosby, is it working?
Mr Crosby: There is not complete
sharing and, therefore, it is not going to work. I do not want
to comment on the details—it is wrong—
Q207 John Mann: I am interested in the
principles of what is happening in the industry, and so is the
Committee.
Mr Crosby: Yes. I think there
is scope for data sharing to improve, positive and negative information.
We share it across the industry on consumers' greatest financial
liabilities which relate to mortgages, but not completely on credit
cards, and it is somewhere we must go as an industry. We are getting
there.
Q208 John Mann: You are getting there
but let me just quote from one submission we have had. "I
wonder whether the problems caused by non-sharing of positive
information are as extensive as some appear to suggest. I wonder
whether some changes in industry practice might at least partly
address the concerns, for example, making it a condition of business
that a customer agrees to share information". Who would have
said that, do you think? Any guesses? It is the Information Commissioner,
and yet in some of the submissions we have, particularly in your
trade body submission, everything seems to fall to the Information
Commissioner. The fact of the matter is you can share information
now, can you not, because some of you do. If you all shared information,
the kind of problems that the general public is concerned about
that keep it in the front pages of the newspapers would be much
less likely to happen, is that not the case?
Mr Crosby: I agree with that completely.
Mr Brownlee: I totally agree.
Q209 John Mann: Mr Daniels?
Mr Daniels: I do not agree. I
think we have to be very, very careful. While we have certainly
agreed with the APACS solution to share information next year,
I think we want to be very judicious in terms of how we think
about it and what it will really do. If we look to some other
examples where there has been full sharing of information in the
US, for example, I think what you will find is that arrears levels
are almost twice as high as they in the United Kingdom. I think
you will also find predatory marketing practices—in other
words, there are some companies that specialise in looking for
highly indebted consumers and then lending them more. I think
we lay ourselves open to those kinds of issues with full data
sharing, so while I am in agreement with data sharing I think
we have to be very careful about how we apply it, and I am not
sure that this is a panacea or will prevent some of the tragedies
we have seen happen recently. It is important to understand that
the customer's ability to repay is only part of the equation—their
capacity, if you will, to repay. Probably more importantly, in
fact, much more importantly, is their attitude toward repayment,
so what we look for more than what is the capacity, if you will,
or how much other debt do they have, is their behaviour and how
they feel about debt and honouring their obligations.
Q210 John Mann: So if they make a minimum
payment to you you would be quite happy, and you are not really
caring about anything else they are doing, then?
Mr Daniels: No, I do not believe
I said that. Very clearly we counsel our customers and we have
it explicitly in our literature that paying the minimum is not
a good idea.
Q211 John Mann: What counselling did
you give to my constituent Stephen Lewis?
Mr Daniels: It is inappropriate
for me to comment on a specific case.
Q212 John Mann: Why? Let me put it to
you, you did not give any counselling? You did not do anything,
did you, as an institution? You are prepared to see information
sharing for mortgages; you are prepared to accept the government
restrictions on people setting up a bank account with you; but
when it comes to credit cards you, as an institution, are not
prepared to share information, are you?
Mr Daniels: We are prepared to
share information and, as I said earlier, we are in agreement
with the APACS sharing that will happen next year.
Q213 John Mann: But when it comes to
full sharing of information you are one of the barriers, are you
not, as an institution?
Mr Daniels: I do not believe we
would be a barrier. I think we have said in our letter to Chairman
McFall and this Committee that we are in agreement with data sharing
and we have agreed with the APACS solution. We should be ready
to share data next year.
Q214 John Mann: APACS is saying it will
need to start negotiating with government and the Information
Commissioner because it is all too difficult, but the Information
Commissioner says it is not difficult, and your competitors say
it is not difficult. What is the problem for you as a company
in sharing information when it comes to credit cards?
Mr Daniels: As I said, I do not
believe it is a panacea. We have agreed to do it but I think we
should be very careful.
Q215 John Mann: No one says it is a panacea.
What is wrong with the principle of sharing all the information
and then having effective triggers that will protect the consumer
who is bad at handling money but also would protect all of us
from fraud?
Mr Daniels: As I said, we have
agreed that we will share data so I am not objecting in principle;
I am simply urging caution.
Q216 John Mann: But that is not what
APACS is saying. What they are saying is there needs to be long
and complex negotiation because it cannot be done. That is what
they said in their submission to us.
Mr Daniels: I believe that there
should be some caution exercised.
Q217 John Mann: Finally, then, why is
there such a difference in your attitude, your submission, and
that of your two competitors here today? Let me quote from HBOS
in a letter to me. "In the mortgage market, for example,
most major lenders share full data. We see no reason why the same
approach cannot be followed in the credit card sector". That
is clear and unambiguous. Why can you not say something that is
clear and unambiguous, and why are you and APACS hiding behind
all sorts of excuses? Or should it be that we as legislators should
force you to?
Mr Daniels: I can only repeat
my position: that I believe that we have agreed to the sharing
of data on credit cards but I believe we should also be somewhat
careful so we do not have some of the excesses we have seen, for
example, with the US that can lead to even more tragedies. The
arrears level is higher and predatory marketing is a factor so
I think we want to be somewhat careful.
Q218 Chairman: On the issue of America
we will have evidence next week from one company which takes a
different point of view from what you say, Mr Daniels, and we
will be putting that in the public domain, but we have one submission
from a number of people to the Committee which says: "The
banks repeatedly claim that they lend responsibly by undertaking
credit checks yet how can they do this if they lack access to
a complete picture as regards to existing debt burdens?"
That is a reasonable question, is it not, Mr Crosby?
Mr Crosby: Yes.
Q219 Chairman: Exactly. On the point
you make, Mr Daniels, you seem in a sense a laggard here compared
with others. On the issue of predatory lending what this submission
says as well is, "It should not be unreasonable for credit
agreements or agreements as amended by later correspondence to
contain a tick box section specifically asking or offering that
customer's consent to the sharing of stipulated financial information
so long as banks do the following: 1. Ensure that the customers
are aware of exactly what financial information they are consenting
to the disclosure, for example, balance outstanding, number of
payments in time, etc; 2. Ensure that the sharing of information
is limited solely to organisations recognised by the Information
Commissioner to be credit reference agencies; and 3. Ensure that
the data will be processed solely for the purposes of assessing
the consumer's creditworthiness". Now that is a reasonable
proposition, I suggest to you. Is that not reasonable? So there
could be safeguards built in there? Mr Daniels?
Mr Daniels: I would certainly
like to think about the matter further.
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