Written evidence submitted by Callcredit
In the oral evidence provided to you by Mr Higgins
of Tesco bank on Tuesday this week, reference was made to Callcredit
and our unique Over-Indebtedness Initiative. For purposes of clarification
I thought it would be helpful to provide some background and operational
information on the Initiative.
I have set out below a high level overview to assist
your understanding, and that of your fellow committee members.
In addition I would be happy to meet with you to provide more
detailed information should you require it.
Just over four years ago, Callcredit launched its
unique Over-Indebtedness Initiative (OII) created in association
with the UK's leading high street banks. This development was
prompted by growing concerns about borrower over-commitment, including
the work of the Over-Indebtedness Taskforce. The OII uses consolidated
income and debt data to assess affordability and provide a strong
understanding of consumer indebtedness and ability to pay. It
signals where a consumer's ability to meet their credit commitments
may be compromised. The service has recently been opened to other
lenders and enhanced to provide an over-indebtedness score which
indicates the likelihood of a customer entering into financial
difficulty.
Callcredit is and always has been committed to helping
lenders make responsible lending decisions, through the provision
of tools that assist with the assessment of affordability and
indebtedness.
Credit data is shared by banks with Credit Reference
Agencies (CRA's) under the rules governing Principles of Reciprocity.
They do not share data directly with each other. Callcredit in
its role as a CRA facilitates the sharing of debt and income data
which is available to both current account and non current account
providers. For all lenders, whether they supply current account
data or not, the solutions use current account data to identify
the most at risk and indebted customers.
This enables us to provide lenders with key indebtedness
reports, based on their customers' debt to affordability position.
In summary, these include:
— Details
of those existing customers whose financial positions warrant
close monitoring.
— Details
of existing customers who are severely over-indebted and need
proactive debt advice.
— When
they are considering offering credit, an affordability check to
complement the information provided by existing credit checks.
Lenders can then determine the most appropriate course
of action for their customers ensuring that levels of over-indebtedness
are not increased, thereby protecting consumers. These key outcomes
are the overriding objectives and purpose of the Over-Indebtedness
Initiative.
If you require further information please do not
hesitate to contact me. I am available to attend a meeting with
you and your colleagues at your convenience.
Graham Lund
Managing Director
10 December 2010
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