what is a credit bureau

8/7/2019 What is a credit bureau

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Experian Limited 2007. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Limited.Other product and company names mentioned herein may be the trademarks of their respective owners. No part of this copyrighted workmay be reproduced, modified, or di stributed in any form or manner without the prior written permission of Experian Limited.Confidential and proprietary.

The role of the credit bureau


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2 Experian Limited 2007. All rights reserved.Confidential and proprietary.

Agenda

Win, win - how the UK model has contributed to economic growth

A closer look at how it works

Introduction to the bureau in the UK Data sharing in the UK then & now

How is the data used - credit - fraud - ID checking - staff

checking - other

Regulation - how is it all controlled?

Consumer education


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Early 17th Century traders meeting inLondon coffee shops to share

information on credit standing of local

customers

The Evolution of Data Sharing in theUK


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The great unbanked - cash society - or cheques

Expensive and limited choice

Credit was available to a favoured few - mainly mortgages and HP

Decisions were often made based on personal knowledge of a bankmanager

Mortgages were only sold by building societies

Home ownership was 50.1% (government figures)

Lending decisions took days or even weeks

Everything happened face to face

Before De-regulation


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Most people have a bank account but do not visit their bank

58,000 cash machines

86 machine transactions per second

263 card transactions per second 24/7

Average 1.6 debit cards & 2.3 credit cards

By 2003 > 70% of households are owner occupied

> 7000 mortgages and 300 credit card issuers

Decisions made in minutes, any time, any day, any place

Now


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Opening a bank account 1971

Personal introduction in branch

3 weeks to open

Then

Applying for a credit card 2006

Research on www

Apply on telephone 22.00

Use immediately to shop on line

Applying for a mortgage 1976 Save for 2 years

Require significant deposit

Only 2 types of mortgage

Now

Applying for a mortgage 2001 Research on www

Apply on telephone

3 days to funds


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World Bank Doing Business Reports 2006 & 2007

Good credit

information

Increased chance

of getting credit

Capital moves to best

business ventures

More

information

Increased

productivity

& growth


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Allows lenders to more accurately evaluate risks and improve

portfolio quality

Increases credit volume / improves access to credit

World Bank states the best way to help borrowers is to improve

credit information and make it easier to take and enforce

collateral

So access to credit is a vital part of economic growth

World Bank

Role of Credit Bureaus in FinancialMarkets


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World Bank Doing Business Reports 2006, 2007 &2008

World Bank states the best way to help borrowers is to improvecredit information and make it easier to take and enforcecollateral

Most popular reforms in 2006 were to create or expand credit

bureaux high risk borrowers will not get credit if protection is too strong

Curbs new business start up

more information at http://www.doingbusiness.org/


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UK number 1again!


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Steady and sustained economic growth

28.97 million in employment most since 1971

Up 220,000 this year

31.06m jobs - highest since 1959

Unemployment % is up slightly - but more people to employ

Confidence is relatively high

Some contraction in revolving credit

House prices continue to rise steadily too

Source ONS 13.09.2006

The UK Economy


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Credit Bureau

Credit

Grantor

Credit

Applicant?

N

Performance Data

Information Request

Credit Report

Granting of Credit

Request for Credit

Y

What is a Credit Bureau?


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Independent broker of information

provided by lenders and third parties

Lender accesses credit bureau to check credit history of applicant

Applicant must be notified

EC Data Protection Directive 95/46/EC

Credit bureau is itself regulated

Credit bureau does NOT make any lending decisions

Where does it Fit into theLending Decision?


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An Introduction to the Experian bureau in the UK


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Created early 1980s Public Data - several thousand clients

Electoral register

Since early 80s

Holds over 1.3bn records > 44m added annually

Updated monthly

County court judgments

Other public data e.g. bankruptcies, Individual Voluntary

Arrangements

Credit data - CAIS closed user group

The Consumer Credit Bureau


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Home shopping

Building Societies Telecomms providers

Credit Card issuers

Finance Houses

high street retailers

Banks

Utilities providers

Industry Wide Data


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Purpose of Sharing Data

Data is shared for the prevention of over-commitment, bad debt, fraud andmoney laundering, and to support debt

recovery and debtor tracing, with theaim of promoting responsible lending.


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Reciprocal - get what you give

2 levels of membership

Default only

Full

Available in raw and summary formats Retained for at least 6 years

> 70% of credit active population

Highly predictive

> 500 members

> 800m records

Closed User Groups


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CAIS

CAIS was launched in 1983

Started as Mail Order default data sharing

Soon moved into general financial Industry default data sharing

Data volumes and clients quickly grew over the next few years

The first CAIS Flags were introduced in 1994

Experian lead industry quality initiatives 1995/6

SCOR established in 1998

First Principles of Reciprocity agreed in 1998

ICO requirements for defaults - issued in 1999


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CAIS 21st Century

First phase Third Party Data requirements from 24th October 2001

CAIS Enhancements introduced in 2004 to support increased currentaccounts sharing

Further CAIS Enhancements in 2006 to support the APACS Behavioural

Credit Card

Sharing Initiative

New CAIS layout summer 2007 enhanced for new product descriptions


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The future

CAIS developments in last 6 months:

Overnight loading of client monthly updates

` Improves data accuracy

` Facilitates faster client alerts

` Helps reduces consumer queries

New company and account types

` Segmentation of CAIS from 25 to 70+ products / sectors

` Allows for improved predictability

` Improves data accuracy

` Compliant descriptions for new data assets


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More data - CAIS

New Credit and Storecard Data

The APACS initiative for the sharing of behavioural data on credit cards is

underway, this involves the sharing of the following fields on all credit card

accounts:

Payment Amount

Previous Statement Balance Number of Cash Advance

Value of Cash Advances

Minimum Payment Indicator

Promotional Rate

Home Credit Lenders The Home Credit Competition Commission has confirmed that home credit

data must be shared with bureaus by June 2008


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Consumer Credit Bureau statistics

Nov 2007 Nov 2003

Electoral Roll 45.5m 44.5m

Rolling Register updates 2.1m N/A

County Court Judgments 4.74m 4.53m

Bankruptcy 258,000 146,000

CAIS 402m 297m

default records 25.8 19m

Credit Application Data 174m 84.4m

Alias/Associations 125m 89.4m

Address Links 319m 146m

CIFAS (Known frauds) 504,000 322,000CML (Council of Mortgage Lenders)100,000 240,000

Total 1051m 686m


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But what does this mean to ourclients?The Credit Bureau

This Solution ticks all the boxes staff satisfaction, customer services andimproving our bottom line. By using Experians data via the web as part of thequalification process we have greatly reduced the amount of work ourunderwriters spend on applications that are subsequently rejected

The Credit Bureau and Delphi for Customer Management

Both this product, an our ongoing relationship with Experian, have provenproductive and successful. A regularly updated view of customers creditcommitments and behaviour is essential to both effective credit riskmanagement and to discharge our duties as responsible lenders

The Credit Bureau, Authenticate and Detect

The use of Experian products has helped reduce the online fraud by 88%,

saving millions of pounds. The system provided by Experian has been extremelypowerful it brings together and automates all the credit risk and fraud elementsand is very flexible


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Data Security

Security is

important to

our clients and

Experian

Security is

important to our

Regulators

Security can

contribute to the

corporate bottom

and top line

Understand the

threats facing your

organization and

how they affect your

businesses

Never take security for granted:

The impacts to your business can be colossal.

Implement a soundsecurity program to

meet the regulatory

provisions and your

customers

expectations

Maximise the

contributions to

your organisation


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Searches (Footprints)

Credit applications - c150m pa

Quotations

ID

Consumer file requests - c2m pa

Links

Names

People Addresses

Derived Intelligence


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Data Protection in practice

CRA clients search databases with consent of data subject

They notify data subjects what data they will get, how they will use itand what data they will supply and how others will use that.

Consumers may request their file for a small charge

File shows all financial data and who has searched, and why.

Only authorised personnel may access consumer data - with theconsent of the data subject

It is monitored and reported

Client use is strictly controlled e.g. use as a marketing source is notpermitted

Breach is a criminal offence


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Varies by purpose and notification

Non credit data

Public

Negative

Default

Full

Raw or scores / subsets only

How is the Bureau Data Used?


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The regulatory environment

How does it really work?


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Partnership based on mutual benefit

Extensive consultation

Public consultation and expert working groups

Long lead times

Learn from experience

Self regulation

Regulatory Impact Assessments (RIAs)

Avoid unintended consequences

UK Consumer Policy


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Overriding policy of

protecting

individual privacy

Privacy for

privacys sake

Highly prescriptive

regulation and

controls

Paternalistic - theconsumer cannot

protect themselves

Protection of

public interest for

collective good -

fraud, economic

drivers, free

access to goods

and services

Consumer

awareness and

encouragement to

accept personalresponsibility

Liberal - free

choice

BALANCEBALANCE

BALANCEBALANCE


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Data Protection Principles

Fair and lawful processing

Specified and lawful purposes

Adequate, relevant and not excessive

Accurate, and where necessary kept up to date

Not kept for longer than necessary

Rights of data subjects

Security of data

Data transfers outside the EEA


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Started 1999

Cross industry agreement on data sharing

Code of conduct embedded in contracts

Administered by Steering Committee on Reciprocity (SCOR)

Continually updated to support market

Documents available at

http://www.experian.co.uk/corporate/compliance/datasharing/index.html

The Principles of Reciprocity


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Association of Payment and Clearing Services (APACS)

British Bankers Association (BBA)

Consumer Credit Association (CCA) Consumer Credit Trade Association (CCTA)

Council of Mortgage Lenders (CML)

Credit Services Association (CSA)

Finance & Leasing Association (FLA)

Mail Order Traders Association (MOTA)

3 x credit reference agencies

Steering Committee on Reciprocity -Representation


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Credit reference agencies and the Consumers


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The blacklist

Affected by previous occupants

Red lining

Secrecy - the X files

We decide who gets credit

Credit rejections are held on your report

Some of the Myths


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Your credit report explained

The credit reference agency explained

A guide for consumer advisers:

` Journalists

` MPs

` Clients

` Debt counsellors

`

and anyone whose has a role advising theconsumer

Consumer Literature


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Young people are tomorrows consumers

Times 100 Case Study (www.tt100.biz)

Getting Credit: A Beginners Guide

Young Consumers of the Year

FSA Workplace financial capability project

www.experian.co.uk/learningzone

Financial Education


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Any Questions?