Across all sectors, identifying and supporting financially vulnerable consumers is an increasing priority. For decades it’s been standard practise for businesses to share information with Credit Reference Agencies (CRAs) to support responsible lending. From mortgages and current accounts to mobile phones and insurance, businesses use CRAs when offering credit or where goods and services are offered in advance of payment.
So why don’t utilities do the same?
A survey by Which¹ demonstrates the extent to which CRAs are used to inform traditional lending decisions, with 99% of lenders using at least 1 CRA and 60% using 2 (for assessment of loans, mortgages, current accounts and credit cards). Comparable information from other industries isn’t available. Although, from our experience and publicly available information, almost all telecommunication providers share and use CRA data and 2/3rds share data with more than one bureau.
After gaining approval from the ICO, the first utility companies began sharing details of customers who had defaulted on their bills just under 20 years ago and some extended their approach to share full payment information (i.e. whether accounts were up to date or in arrears each month) in 2010. However, unlike other industries, not all utility companies have followed suit. We estimate that adoption in water is higher than energy but overall less than half of utilities share full payment performance with a CRA.
Just in case persistent debt levels and the need to support financially vulnerable customers isn’t enough justification for you, do we need to consider some fundamental questions when contemplating whether utilities should share data with CRAs?
Can utility customers get into debt? Is it a problem? Looking at Ofgem’s latest reports the answer to this is, yes. We see that the volume of ‘outstanding’ consumer debt with no payment arrangement in place is at its highest level, and presumably this debt continues to grow as disconnection is a thing of the past – ofgem social obligations 1.
Is utilities debt different from other consumer debt? Most utilities offer the option to spread payments which is similar to paying monthly for a mobile phone contract or broadband. They can all be considered ‘essential services’. However, there are factors that are unique to utilities; a lack of timely accurate billing and the use of ‘estimates’, for example. The increase in the use of water meters and the aggressive roll out of smart meters should negate these and, in the meantime, consumers can provide their own meter reads to ensure bills are accurate. Therefore, overall, I believe that utilities debt is sufficiently similar to other consumer debts that are shared with CRAs.
So why should utility companies share data with CRAs? This boils down to 2 key points; it’s good for consumers and businesses.
1. It’s in the interest of consumers:
‘Responsible lending’ is the foundation of CRAs in the UK. How can any business make a good credit decision on a consumers’ financial situation if they don’t have the full picture? At the moment
consumers could have debt across several energy suppliers that might not only be hidden between themselves when assessing affordability but also invisible to a bank when considering a loan.
It will help ‘Credit Invisibles’. 5.8 million people in the UK are virtually indiscernible to the mainstream financial system because there is no information available on their track record at a CRA. Without access to affordable relevant financial products, the ‘Invisibles’ have less choice and are forced to pay a ‘poverty premium’, often turning to subprime lending. There are many reasons people are invisible; divorce, foreign nationals, savers, renters (though this is now being addressed through the rental exchange data sharing initiative). For these groups, if you’ve never had credit, it’s harder to get credit. By sharing data with one or more of the CRAs, utilities can make a huge difference to this marginalised population and aid financial inclusion, a point which was firmly recognised within the report by the Financial Inclusion Commission (3.46).
Support for vulnerable customers. The Financial Conduct Authority’s biggest ever survey of households found that 4.1 million people are in serious financial difficulty, falling behind with bills and credit card payments, with 25- to 34-year-olds the most over-indebted. Furthermore, it found half of the UK population are financially vulnerable, with one in six unable to cope with a £50 increase in monthly bills. It’s unlikely that utilities, who are yet to share data with CRAs, will be able to identify such customers until they begin to miss payments, which may be too late.
CRAs also have a crucial role to play in supporting business to improve the quality of consumer data held by utilities. This can have several benefits; from correctly identifying ‘customers’ (as opposed to accounts) – which can ensure that information is not ‘lost’ should a vulnerable customer move address but also to help identify, for example, those eligible for priority services initiatives where there are gaps in internal data.
Reduce bills. Operational costs should reduce if CRA data is used effectively to understand customers’ ability to pay and structure payment plans for success.
2. It’s good for business.
Firstly, there is no charge² (from the CRAs) to share data with them and it’s easier than you think to compile the data.
Reduce losses. ‘Won’t payers’, as opposed to ‘can’t payers’, will have an extra incentive to pay (to avoid impact on their credit files) as soon as you communicate your intentions to share data (or extend your existing arrangement to share full payment information). A water company estimated the benefits of introducing data sharing equated to £2m less in early arrears³. Before registering a ‘default’ on a consumer’s credit file you must send an appropriate communication. This often elicits a huge response and the cost to collect is lowered.
Reduced cost to service and collect. Once data sharing with CRAs is established you can begin to see what data you can use from CRAs (though this is where CRAs begin to charge). For example, understanding a consumer’s total financial picture will help you to structure debt repayment plans for success, assess ability to pay in a fair, consistent and holistic way. Not to mention understand who lives at a property and trace debt.
It can help with regulation. Not only can CRAs help with Ability to Pay but as per Ofgem’s Draft Consumer Vulnerability strategy 2025 ,there is a clear move towards greater sharing of data across industries and proactively identifying vulnerable customers. Ofwat stated that data sharing represented Debt Collection best practice in the water sector back in 2015. Unless you regularly speak to all of your customers, CRAs are the only way that you can proactively identify financially vulnerable customers who are showing signs of financial stress outside of their relationship with you.
So all in all utilities should share data with CRAs to help support vulnerable customers, address rising persistent debt levels and because it’s good for business too. If you’re a utility supplier and
• considering sharing data with a CRA, or
• you already share default information and are considering moving to full sharing, or
• you don’t feel you’re leveraging you’re CRA relationship
Then we can help. To find out more take a look at our Data Management solutions.
For further reading, explore our credit invisibles case studies that look at real people who have experienced financial exclusion.
¹ Article on Which. Read more.
²There is no charge to share data with Experian. However a small admin fee can be applicable to set up a process to manage queries arising from consumers who may dispute data shared.
³Article on Loop. Read more.