Appendix 1: Government Response
HM Treasury sees the Treasury Committee's inquiry
into credit searches that was published in December 2009 as an
important contribution to discussions on the impact of the banking
crisis on consumers' ability to access credit.
The Treasury agrees with the Committee's view that
it is important that consumers are able to shop around for credit
products and should not be disincentivised from doing so. A key
facilitator of this is consumers' knowledge of the price of credit
being offered. Where this involves the use of multiple credit
searches, it is important that this process does not act as a
deterrent to the proper functioning of the market, particularly
by deterring consumers from looking for the most suitable form
of credit. The Treasury also notes that the Committee did not
conclude that there was strong evidence that application search
data presents a major source of consumer detriment.
The Government takes competition and transparency
very seriously and is keen to ensure consumers have access to
all the information they need to manage their financial affairs
actively and responsibly. Following negotiations with the consumer
credit industry, the Government announced in July 2010 that consumers
have a right to access their statutory credit report online from
all three major UK credit reference agencies (Experian, Equifax,
and Callcredit) for a nominal fee of only £2. This is a significant
change that makes it easier for consumers to access the information
held on their credit reports. The £2 fee represents a proportion
of the administrative cost to credit reference agencies. The Government
believes this is a reasonable price for consumers to pay. Victims
of ID fraud and the financially vulnerable are able to access
their credit files for free. Free reports will also be offered
to those referred by debt advice agencies.
The Treasury sees credit searches as an important
indicator of consumers' credit behaviour. Credit searches in themselves
do not indicate poor credit history. It is possible that they
may reflect an astute borrower's attempt to secure the best deal
among several for which they have applied. It is important therefore
that the public's perception of credit searches is not negative.
We therefore welcome the Committee's recommendations for continued
work to improve transparency and consumers' understanding of credit
searches.
The Committee may also wish to note that, earlier
this year the Government announced a joint BIS and HM Treasury
review of consumer credit and personal insolvency. The review
will cover all aspects of the consumer credit Iifecycle from the
decision to take out a loan through the lifetime of the loan,
including what happens when things go wrong. This is an opportunity
to ensure that we have a regulatory framework is fair to both
consumers and the industry. Going forward, it will help to inform
priorities in this area for the Government. BIS issued a formal
call for evidence as part of the review in October, with a closing
date of 10 December.
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