According to a report from the creditman.co.uk website, HBOS, HSBC, Lloyds TSB and RBS Group are all involved in the new initiative, whereby lenders will share application income and new current account data with Callcredit. This will enable a method of assessing affordability by measuring a consumer's ability to meet their credit commitments.
The initiative will be of benefit to both consumers and lenders. On the consumer side, it will help to reduce inappropriate high borrowing, as well as providing an early warning system for those approaching the limits of their affordability.
Meanwhile, the initiative marks another step forward for methods by which lenders can limit bad debt. Following a number of interest rate rises since 2003, the economic climate has changed and both consumer spending and the housing sector have slowed.
Now an increasing number of consumers are having trouble paying off debt from past spending splurges. As a result, a large number of lenders have seen a rise in their bad debt provisions and many have tightened up their credit approval policies.
Indeed, banks are beginning to show a willingness to share positive debt and other information - once matters privy only to the lender - in order to provide a better picture of a customer's personal finances and their level of indebtedness. HSBC became the first bank to share data about consumers' behavioral patterns of spending and repayment. Other approaches in the same vein have also included Experian's and Callcredit's consumer indebtedness indexes.
Such initiatives help lenders not only assess a customer's whole situation better, but also identify customers who are reaching their limits of affordability. They also help support responsible lending, an initiative promoted by the Financial Services Authority.
The new initiative should be welcomed across the industry and by the government: data sharing is central to better lending decisions and hence, controlling consumer levels of indebtedness. 'End Intelliext
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