Select Committee on Home Affairs Written Evidence


Memorandum submitted by Experian


  Experian is a global leader in providing analytical and information services to organisations and consumers to help manage the risk and reward of commercial and financial decisions. Combining its unique information tools and deep understanding of individuals, markets and economies, Experian partners with organisations around the world to establish and strengthen customer relationships and provide their businesses with competitive advantage. For consumers, Experian delivers critical information that enables them to make financial and purchasing decisions with greater control and confidence. Clients include organisations from financial services, retail and catalogue, telecommunications, utilities, media, insurance, automotive, leisure, e-commerce, manufacturing, property and government sectors.

  Experian Group Limited is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE-100 index. It has corporate headquarters in Dublin, Ireland, and operational headquarters in Costa Mesa, California and Nottingham, UK. Experian employs more than 12,500 people in 34 countries worldwide, supporting clients in more than 60 countries. Annual sales are $3.1 billion (£1.7 billion/€2.5 billion).


  1.1  The purpose of the paper is to provide the Home Affairs Committee with background to what a credit reference agency does to assist with its inquiry.

  1.2  A credit reference agency (otherwise known as a credit bureau) does not make any lending decisions in its own right nor does it express any opinion as to an individual's ability to repay a loan. Rather it provides factual data and tools to lenders for this purpose. Lenders will make their decision based on information provided by the consumer, information obtained from a credit reference agency (which is obtained with the consumer's consent), information from other sources and most importantly, against that particular lender's underwriting criteria.

  1.3  Information held by a credit reference agency largely consists of publicly available records, such as the electoral register, county court judgments and bankruptcies. Alongside this it holds information relating to credit applications and credit accounts provided by lenders, with the consent of the consumer. By bringing this objective information together lenders can make accurate, responsible decisions about an individual's ability to repay a loan.


  2.1  It is a key strategy for Experian to position itself with consumers and its clients as a trusted custodian of personal data and an acknowledged leader in the field of compliance, data protection and data sharing. Its dedicated Regulatory and Consumer Affairs team is charged with this responsibility across Experian.

  2.2 Experian facilitates the sharing of data through a secure database repository where data are obtained, stored and accessed strictly in accordance with relevant legislation and codes of practice governing the use of shared data.

  2.3  Experian operates in a highly complex and regulated environment. The Data Protection Act 1998 governs the processing of personal data both by Experian clients and by Experian itself. There is other legislation governing the use of specific datasets—The Representation of The People Act controls the use of electoral register data.

  2.4  As a Credit Reference Agency Experian is also licensed by the Office of Fair Trading under the Consumer Credit Acts 1974 and 2006. Consumer complaints can be directed to both the Information Commissioner's Office and Financial Ombudsman Service.

  2.5  Experian is committed to achieving the highest possible levels of data accuracy, security and integrity. Its Regulatory and Consumer Affairs function works closely with regulators, including the Office of Fair Trading and the Information Commissioner, to ensure that all procedures, products and systems are carried out and developed to their satisfaction and within the appropriate legal framework.

  2.6  Commitment to compliance and data protection is further demonstrated through Experian's active participation on government consultative groups, industry trade bodies and associations, together with direct client involvement to increase compliance and data protection awareness.

  2.7  Equally Experian is committed to its consumer-facing obligations as a Credit Reference Agency. Its Consumer Operations department of over 200 people is dedicated to working with consumers and suppliers of their data to ensure its accuracy. In tandem with this service, Experian liaises with the media, government, money advisors and consumer organisations to promote transparency in terms of what personal information is held and why and how it is used.

  2.8  This submission expands on the role Experian plays as a credit reference agency.


  3.1  The UK has three consumer credit reference agencies. Their databases bring together data from many different sources—public, proprietary and self-reported by consumers—to provide the basis for informed and timely business decisions by their clients. These decisions are primarily around credit applications, but increasingly relate to authentication checking—confirming the consumer is who they claim they are, which is critical for lending decisions and indeed is required by Money Laundering regulations.

  3.2  The credit reference agencies provide comprehensive information on the credit status of individuals by combining publicly available records with credit account details received from many hundreds of credit grantors.

  3.3  When consumers seek financial services, they provide the financial service provider with information on their financial position. As part of the process of underwriting a consumer's application, the majority of providers, with the consent of the applicant, utilise the facilities of one or more of the UK credit reference agencies. These supply the financial service provider with reliable credit performance data from other financial institutions, relating to the consumer. The credit reference agency does not disclose the origin of such information to the provider.

  3.4  The consumer benefits from choice and competition across a wide range of financial services, which has been made possible by the innovative and technologically advanced collection, use and delivery of information. The credit reference bureaus provide up-to-date and comprehensive information to a wide range of consumer facing organisations, enabling them to offer swift and discrete decisions in shops, banks and a range of other organisations, face-to-face and on the telephone or via the internet.

  3.5  Consumers benefit from the knowledge that their information is provided and assessed in an understandable and controlled format and that they have the right to access their records at any time, and ensure the information is correct. They also have confidence that their data may not be accessed by unauthorised persons and that it is protected by law under the provisions of the Data Protection Act 1998.

  3.6  Data sharing in the UK is governed by the Principles of Reciprocity—as agreed and policed by the Steering Committee on Reciprocity (SCOR)—as well as being subject to all the legislative requirements relating to the processing of personal data.

  3.7  SCOR is an industry body consisting of representatives from the British Bankers Association, Finance and Leasing Association, Council of Mortgage Lenders, Consumer Credit Trade Association, Mail Order Traders Association, APACS, Consumer Services Association and Consumer Credit Association, together with representatives from the three UK credit reference agencies. Credit reference agencies are not therefore able to determine unilaterally how shared personal data may be used.


  4.1  The UK credit market is the second largest in the world after the USA, with the majority of the adult population holding a range of financial products, from a wide variety of organisations, as a matter of course.

  4.2  Competition to satisfy the demand in the UK is increasingly fierce. Many consumers move from lender to lender, taking advantage of opening offers and moving on to the next attractive deal when the offer expires.

  4.3  At a time of record levels of UK debt, lenders are more reliant than ever on full bureau information to ensure that the new-to-organisation applicant can be identified and their financial position and stability understood in order to make credit or financial service decisions. Legitimate and transparent access to data has been fundamental to the development of this competition.

  4.4  Lenders use credit bureau data, inter alia, for risk assessment and affordability decisions to ensure consumers are offered the most appropriate product for their specific requirements.


  5.1  Lenders search the databases at credit reference agencies with the full knowledge of the applicant. A standard notification and consent wording agreed with the Information Commissioner is now being widely used by banks, credit card issuers and similar organisations.

  5.2  Other clauses advise the customer whether records of applications and information on the performance of credit accounts are lodged with credit reference agencies and made available for the purpose of the prevention of over-commitment and fraud.

  5.2  Only those consumer records on which consent to share the data is given are held on the credit bureau.

  5.3  Extensive client veracity checks are conducted before a financial services provider is permitted access to a credit bureau's records. Ongoing monitoring is also carried out to ensure patterns of client usage are consistent.

  5.4  Physical data security is critical to Experian, with a multi million pound investment having been made in a purpose built data centre. This is backed up by strict data access controls and protocols overseen by a dedicated Information Security function. All Experian employees and clients who require access to Experian systems and information are individually authenticated before any information is provided. Rigorous access controls ensure that information is only provided to authenticated users based on their authorised job function/responsibilities.

  5.5  In addition to compliance with the Data Protection Act, credit reference agencies work to a number of other regulatory requirements, codes of conduct and guidance notes such as the industry-backed Guide to Credit Scoring and the Information Commissioner's Guidance Notes on Credit Referencing and Defaults.


  6.1  The UK financial services market is highly sophisticated, competitive and delivers real choice and benefit to both the consumer and the economy. It has grown and developed as UK financial services companies have developed through competition. That competition has been possible because of the open nature of the UK market and the increasing sophistication of UK consumers.

  6.2  Barriers to entry for financial services providers are low and the availability of information from shared databases at credit reference agencies enables real competition to thrive. It also makes it possible for lenders to lend more responsibly and monitor account behaviour on an ongoing basis.

  6.3  The benefits and value of the UK model are acknowledged in the work undertaken annually by the World Bank in its "Doing Business" survey, see, which identifies the UK as the top-ranking country in which to obtain credit based on the balance between legislative protection for consumers and lenders together with the breadth of information in the credit reference agencies. It considers that a functioning and effective credit industry is a vital contributor to economic stability and growth in GDP.

  6.4  The Competition Commission has also recognised the pro-competitive impact of the provision of shared access to consumers' payment data in its recent report on home collected credit.


  7.1  As a credit reference agency Experian has statutory obligations under both the Data Protection Act and Consumer Credit Act to provide a consumer with a copy of their credit report and to help them deal with any queries on this report, if necessary liaising with lenders and other third parties on their behalf.

  7.2  Over the past 12 months Experian has provided over 1.5 million new credit reports to consumers and a further three million repeat reports through its on-line credit report membership and monitoring service. Its Consumer Services team helped over 900k consumers with questions on their credit reports.

  7.3  Experian takes its consumer obligations much further than this and works closely with consumer groups, such as Citizens Advice, Which? and the National Consumer Council, and with money advice organisations like the Consumer Credit Counselling Service and National Debtline, providing free credit reports to people who are receiving free debt counselling.

  7.4  Similarly Experian's clients are encouraged to be as forthcoming as possible about the role credit reference information plays in their decisions to make sure consumers get accurate and helpful information when they need it. Experian also works very closely with all the relevant lending trade associations on a variety of issues and initiatives.

  7.5  Its Consumer Affairs team regularly provide material for publications and contribute extensively to all forms of media, including television and radio, to ensure that consumers are aware of their rights in this area.

  7.6  Experian's free booklet, The Credit Reference Agency Explained provides an overview of the credit reference agency's role and its "Credit Crossroads" leaflets provide advice and guidance around financial issues and "life events". These are distributed through citizens advice bureaux and other consumer advice centres.

  7.7  Each year, the Consumer Affairs team spend considerable time talking directly to consumers at exhibitions such as the conferences of Citizens Advice, The Institute of Money Advisers, Money Advice Scotland, the Trading Standards Institute as well as at consumer events like the Ideal Home Show and BBC Good Homes Show.

  7.8  At a policy level Experian is involved in several consumer education and financial capability projects, including those led by the Financial Services Authority, the Office of Fair Trading and the Personal Finance Education Group.

  7.9  Most recently in 2006, Experian launched a resource pack for teachers, Getting Credit: A Beginner's Guide, to help them deliver numeracy and literacy lessons around the theme of applying for, getting and managing credit. Additionally support is provided to the Young Consumers of the Year competition, giving the schools that take part information about consumer credit and helping set questions about the process for granting credit.


  8.1  Since 2003 Experian has provided a dedicated support service to consumers who have been victims of identity fraud. During this time, assistance has been given to over 15,000 identity fraud victims. There are now on average 100 victims of fraud contacting Experian's Victims of Fraud team each week.

  8.2  This free service was introduced to offer consumers a single point of contact and to act as intermediary in the restoration of a consumer's accurate credit history. By acting on a consumer's behalf and by co-ordinating any necessary activity the Experian service significantly reduces the amount of time it would normally take an individual to restore his or her credit history.

  8.3  Once Experian has established that an individual is a true victim of fraud and their identity has been fully authenticated, they are provided with the following:

    —    A dedicated case worker (with a freephone number), who will give general and ongoing advice on identity fraud as well as dealing with the specific problems being experienced by that individual and helping to liaise with lenders on their behalf.

    —    A free copy of their credit report along with copies of Experian's consumer advice leaflets—Your Credit Report Explained and Identity Fraud Explained.

    —    A discrete password which is added to their credit report which ensures lenders are alerted to the fact that an individual has been an ID fraud victim and should therefore request the password prior to proceeding with an application for credit.

    —    Information about and referral to CIFAS (the UK's fraud prevention service) for Protective Registration.

    —    Free 12 month membership Experian's credit report monitoring service, CreditExpert.


  9.1  The UK model enables the consumer to shop around for the best deal secure in the knowledge that lenders are able to see the most up to date information about them and make the best possible decision. Consumers are no longer limited to taking products from the organisation with which they already have a relationship because other do not know enough about them. As a result, healthy competition has driven down the cost of credit to consumers and resulted in wider choice.

  9.2  The macro and micro economic benefits of this are acknowledged in the DTI White Paper in 2003—Fair, Clear and Competitive—The Consumer Credit Market in the 21st Century, which opens with the statement:

    "Consumer credit is central to the UK economy. Economic stability based on sound fundamentals is bringing rising prosperity, record employment and low interest rates, all underpinning increased demand for credit. For most, credit cards and other secured and unsecured lending provide people with greater control and flexibility when managing their finances—collectively benefiting the economy A competitive and efficient financial sector, of which the consumer credit market is an important part, is essential to raise the level of economic growth in the UK economy."

  9.3  The World Bank makes it clear that central to the success of the UK consumer credit market is the effective and competitive credit bureau regime in the UK.

  9.4  At the same time, the consumer's rights under the Data Protection Act to obtain a copy of the information held about them (and to get it queried and/or corrected if it is incorrect) gives them the security of knowing what information was used to make that decision and critically, who has been looking at it. This is because every access is required to leave a footprint visible to that consumer showing when and by whom their credit report was searched.

  9.5  Credit referencing in the UK is transparent. A credit reference agency provides a central and highly controlled repository of information that may be made available only with the consent of the data subject for purposes that benefit them, typically in accessing goods or services.

May 2007

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