Credit card industry announces important data sharing enhancement

Additional data will help the credit industry to identify customers who may be at risk of getting into financial difficulties and to deliver on commitments in the revised Banking Code

APACS, the UK payments association, on behalf of the credit card industry today announced an important enhancement to well established data sharing processes to share ‘behavioural data’ on their customers’ accounts.

All APACS members have committed to this initiative. Starting this December, five credit card issuers - Barclaycard, Capital One, GE Money, HBOS and MBNA - will be ready to share the data and others will then follow in accordance with their specific IT plans. The data will be shared to help to identify and assist people who may be starting to experience financial difficulties. The new initiative will also help the industry to fulfil its commitment to responsible lending, as set out in the revised Banking Code, which came into effect in March this year.

Traditionally, shared data for credit cards has included the customer's balance, credit limit and whether payments are up to date. The new data will now also include the amount of their last payment, and whether this was equivalent to the minimum payment; changes to credit limits; the extent to which they withdraw cash on their account and if the customer is signed up to any promotional deals. This last category is particularly important because it makes it possible for a lender to distinguish between someone only ever paying the minimum repayment because they may be in financial difficulty, from someone who has the means to repay, but chooses not to because of a deal they have obtained.

Data is shared through the credit reference agencies and will enable lenders to have a clearer picture of how customers use their credit cards, so that they can lend accordingly- thus supporting the industry's long-standing commitment to responsible lending.

Paul Rodford, APACS' Head of Card Payments, said:

 “The holy grail for credit card companies is to have access to data that could predict a customer’s future ability to repay. Data sharing is well established in the UK, and has evolved over many years. This new data relates to how customers manage their accounts and will enable lenders to intervene, at an earlier stage, for those showing signs of debt stress and ensuring that those already struggling are not given further credit.

"Our announcement today is not a silver bullet for tackling over-indebtedness, but it is a significant step forward in the card industry’s ongoing commitment to responsible lending. It has taken a great deal of work and investment to achieve and should bring real benefits for the consumer.”

Peter Tutton, Senior Policy Officer, Citizens Advice, comments:

"Citizens Advice welcomes the news that this important enhancement to data sharing is now launched. We believe that it is increasingly important that customers who are showing signs of experiencing debt stress are identified at an early stage, so that appropriate help can be provided. It is now imperative that lenders make full use of this additional information as part of an ongoing commitment to responsible lending.”

To coincide with this announcement and explain how behavioural data will now appear on a customer’s credit report, APACS has revised its consumer guide, Your Credit Record, which sets out the information held on a credit report by the credit reference agencies and explains why it is important for consumers. The guide can be downloaded from here: http://www.apacs.org.uk/resources_publications/documents/Yourcreditrecord-November2008.pdf

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For further information contact the APACS Press Office on 020 7711 6316 or press@apacs.org.uk

Notes to Editors

APACS is the trade body that gives banks, building societies and card issuers a forum where they can work together on non-competitive issues. We help manage the way that businesses and individuals in the UK move their money around - this covers cash, credit and debit cards, cheques and automated payments such as Direct Debits, salary payments and the new Faster Payments Service launched on 27 May for online/phone banking transactions and standing orders. We lead the fight against banking fraud and twice a year we publish figures on payment industry fraud losses.

• During December, a number of credit card companies will start to share the new behavioural data on their credit card customers, as an important improvement to existing well-established data sharing processes. 

• APACS has championed improved data sharing in the credit card industry. To date this has included the commitment of all credit card issuers to share data on all credit card accounts, to the extent allowed by law. 

• Data currently shared, however, is of limited use in predicting a customer’s ability to manage their debt if they were to be impacted by an external event or life change (such as the loss of their job or divorce).

• Many commentators suggest that certain behaviour could well indicate that a customer is at risk of becoming over-indebted - specifically only ever making minimum repayments on a number of cards and or making regular cash withdrawals on credit cards.

• In December 2005, a number of banks signalled their intention to increase the amount of data shared about cardholders’ credit card accounts. Subsequently, work has been progressed at an industry level to define the new data, facilitate the technical requirements and create the rules around the use of the data. 
  
• The new data to be shared will include:

  ̶ The amount of the last payment and whether that is equivalent to the minimum requested repayment
  ̶ The number and value of cash advances on that credit card;
  ̶ Changes to credit limits
  ̶ Whether there is a promotional interest rate in place (which might explain why a minimum payment is being made)

• As with all shared credit data, lenders must at all times comply with the requirements of the Data Protection Act 1998, together with the industry's own strict self regulating rules to prevent the use of shared data for target marketing.
  
• Most participating credit card companies are expected to share this new data during the course of 2009, giving lenders a greater pool of information on which to base their lending decisions.  

Further information on this initiative may be found on the APACS website: http://www.apacs.org.uk/payment_options/Creditcardbehaviouraldatasharing.html