The regulator said it will study the ‘coverage and quality’ of the market and its impact on ‘vulnerable customers’.
Information from credit agencies is used by fintechs, peer-to-peer lenders, banks and other financial firms to judge the cost of a range of financial services, such as mortgages, loans and credit cards to consumers. In many cases, this data decides whether an applicant is sold the service at all.
The UK regulator said it will study the “coverage and quality” of this information and the “impact it has on consumers”.
It adds that “vulnerable customers for whom a lender’s decision is more finely balanced are most likely to be affected if the credit information market is not working well”.
Fintechs grew in the aftermath of the 2008 financial crisis, when many consumers and small businesses with poor service and restricted lending from high banks, and sought alternatives.
These new firms, ranging from app-only banks like Revoult to business lenders such as Funding Circle, champion financial inclusion as one of their key aims.
The regulator said credit information markets are important because nearly 4 in 5 adults hold at least one credit or loan product, and 3.1 million adults have taken out one or more high‑cost loans over the last 12 months, according to the FCA Financial Lives Survey.
The FCA said its study will focus on three areas:
the purpose, quality and accessibility of credit information
market structure, business models and competition
consumers’ engagement and understanding of credit information and how it impacts their behaviour
The watchdog added its report will study how the UK market “is working now and how it may develop in the future”. It will also look at how credit markets work in other countries.
The FCA expects to publish its conclusions next spring “including, if appropriate, a discussion of potential remedies”.
It adds that although it is not formally consulting the industry on this report, it will welcome any views on the market until the end of July.