Jul 2020 | Data Quality | Consumer Credit Data, Data Management
By Posted by Experian

Good data quality is essential. The better it is, the more value you can extract from it.

However, in our recent Data Management report we found that only half of the organisations considered their customer data to be clean and fully reliable.

For any organisation submitting data to a credit bureau, high quality, completeness and accuracy are high on the priority list. Inaccurate or incomplete data can have a significant impact on the way consumers or businesses are represented in the credit market. This can also lead to poor customer experience, challenges in customer management or have negative regulatory impact.

In light of the Covid-19 pandemic, the UK government, the regulator and businesses continue to take steps to respond and adapt to the “new normal”, supporting the needs of consumers, customers and suppliers, whilst operating in a financially and operationally unknown environment.

A few months ago, the UK government has issued a set of guidelines introducing payment holidays (or freezes) across a number of credit products. This effectively has offered struggling consumers and businesses the option to defer payment on their credit commitments for a set period of time (3 months initially) while their credit rating remains unchanged.

As of May 2020, 4.5m payment freezes have already been requested across the different credit products. (Source UK FLA).

This has created a new challenge for lenders submitting data into the credit bureaus. As the FCA and the CRAs have instructed them to follow an additional set of payment freeze related rules in their submissions, their systems are not naturally set up to handle this process.

For example, lenders could be at risk of potentially submitting data into the bureaus that will adversely affect a consumer or business’s credit score on a payment holiday:

  • Their process will detect the absence of a payment and automatically increase the Account Status of the consumer, not taking into consideration the payment freeze situation.
  • The high volume of requests means many consumers and businesses have had difficulty contacting lenders to ask for payment freezes. As a result, many payment holidays have been granted retrospectively.
  • Some other operational issues, including the high volumes of queries, could have resulted in payment holidays not being recorded and actioned correctly.

Furthermore, the initial period of 3 months for payment freezes has already been extended for mortgages and there is every likelihood that other credit products could follow.

As such, this introduces an additional problem – one of duration as well as an exit strategy and how to eventually report on customers where payment arrears have been potentially masked for many months or delay on potential default that need to be reported.

Our Data Quality for CAIS solution enables lenders to easily reflect payment freezes in CAIS reporting. The solution reads the CAIS submission and a list of affected account numbers provided by the lender. It may also read the CAIS master file or the previous month’s submission. It then implements logic to update the Account Status of affected accounts, usually reverting them back to the previous Account Status, and creates an updated version of the CAIS submission.

Ensuring data quality is optimal greatly reduces risk of inappropriate product recommendations and lending decision, ensuring lenders can provide the very best service to their customers during this challenging time.

In addition, our Data Quality for CAIS solution and bureau services can help support data quality initiatives with end-to-end data quality management solutions.