The regulator said it had “identified concerns about the coverage and quality of credit information, the effectiveness of competition between credit reference agencies (CRAs), and the extent of consumer engagement.”
Its paper MS19 1.1 added: “The credit information market is important, and we have concerns about it. This means we must understand how the market functions and whether it is working in the interests of credit information users and consumers.”
Credit information is a critical aspect of decision making for many mortgage lenders when assessing consumers’ risk and affordability.
Much of this information is derived from credit scores and other information held by CRAs, who access consumers’ information from other sources.
The CRA market is dominated by Experian and Equifax, with several other smaller players becoming increasingly active.
Experian bought a 25 per cent stake in broker firm London and Country in December 2017, but had to call off its proposed merger with fellow CRA Clear Score in February after resistance from the competition regulator.
The FCA’s market study will focus on three main themes:
- 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.
In exploring these themes, the market study will assess how the sector is working now and how it may develop in the future. It will also look at how the markets for credit information work in some other countries and what the UK market might learn.
“The credit information market is undergoing a period of significant change: regulatory and technological developments may present new opportunities for consumers to engage with credit information and related services, but may also create risks or raise ethical considerations,” the FCA continued.
“We will therefore also explore future trends and how the sector may develop and the impacts on markets and consumers.”
An interim report setting out analysis, preliminary conclusions and potential remedies is expected in spring 2020, with the final findings later in 2020.
If necessary, the FCA has several ways to intervene including rule-making, publishing general guidance, proposing better self-regulation for the industry or introducing firm-specific remedies or enforcement action.
It can also introduce or remove rules to lower barriers to entry, expansion or innovation, and for issues outside its perimeter it can refer the matter to the Competition and Markets Authority (CMA).