Banks launch information sharing scheme

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The Independent Online

Four of Britain's five biggest banks have announced a ground-breaking agreement to share information about customers in an attempt to reduce the number of borrowers who fail to repay their debts.

HBOS, HSBC, Lloyds TSB and Royal Bank of Scotland said yesterday they will for the first time provide details of customers' incomes to an independent credit reference agency, Callcredit.

In combination with the existing information Callcredit holds on customers' credit arrangements, the arrangement will enable the banks to study which borrowers have taken on too much debt relative to their income.

Callcredit's Jo Gill said: "The Department for Trade & Industry defines over-indebted as someone spending more than 25 per cent of their income on servicing the minimum repayments on their credit agreements."

However, the launch was undermined by the failure of Barclays Bank to support the deal. Ian Barber, of Barclaycard, Britain's biggest credit card lender, said while the bank welcomed the scheme, it had chosen to concentrate on a separate initiative to share more data on spending, which it launched in December with three smaller lenders. "Our credit card data-sharing scheme has been our focus and we are delivering on that," he said."We do already get income data from application forms and are also able to make certain assumptions about borrowers' incomes."

The Callcredit deal is significant because until now, data sharing agreements between banks and other lenders have concentrated purely on debt. Lenders routinely provide the UK's three largest credit reference agencies with details of customers' borrowing facilities and any repayment failures on their account.

However, without knowing how much income borrowers have coming in, it has proved difficult for lenders to spot customers likely to become over-extended.

As a result, the system has failed to prevent a significant increase in the number of borrowers getting into financial difficulties. Figures from market research analyst Datamonitor, published this month, suggest the average adult owes £4,021, excluding their mortgage - a third more than in 2001.

Under yesterday's agreement, Callcredit will provide the four participating banks with regular reports on customers' levels of indebtedness and specifically identify customers who are severely over-indebted or those whose accounts need close monitoring. The banks will also be able to use the scheme when deciding whether to accept applications for credit.

"The emphasis on affordability is crucial," said Malcolm Hurlston, head of the Consumer Credit Counselling Service, the debt advice charity. "Some of the worst cases of over-indebtedness have no history of bad debt but have run up commitments out of sync with their ability to repay by making the minimum repayments."