Here at Experian Decision Analytics we use the data at our disposal, our statistical knowledge and our business and market experience, to help lenders ensure they are making informed, and most importantly, responsible decisions on who they lend to. How? Through scorecard developments, policy rule analysis and strategy reviews amongst others.
For each aspect of the analytical work, and for individual lenders, there is a wealth of data to call upon, but with that come a number of rules and regulations that must be adhered to by both Experian and lenders. Here at Experian we act as both a Data Controller and a Data Processor and take data protection very seriously. As well as ensuring compliance with the Data Protection Act there are internal policies in place to ensure the data is used correctly. On a day to day basis we have a responsibility to make sure the rules are kept, and everyone plays a part.
Before conducting any analytical work there are a number of key questions that need to be asked;
What is the aim of the analysis?
Whilst this seems like an obvious question its importance cannot be underestimated. The ultimate aim of the use of data is to ensure that lenders are making responsible decisions and to minimise the risk of a customer encountering significant financial difficulties in the future. Understanding the specific objective of any proposed piece of analytical work is the key driver to deciding what data may or may not be used. Certain data sources are designed for certain purposes, and they may not be able to be used outside of this purpose. Once the aim is understood the follow up question can be asked;
What data can be used for this objective?
Some data sources will not be helpful whilst some are simply not allowed. As an example – there are two versions of the Electoral Roll, the full version and the edited version, and which one can be used is dependent on the purpose. The full Electoral Roll can be used to assess credit risk, but it cannot be used for marketing. Therefore, if we know that the purpose of the analysis is to assess credit risk, then we are permitted to attach the full Electoral Roll information.
When conducting analytical work, or carrying out data attachments for lenders, the next important question to ask is;
What data is the lender allowed to access?
Not everyone can access all data sources. Let’s take historical credit account information, in other words the information on a credit report. This includes information such as the number of active accounts, worst status on active accounts in the last 6 months and the number of defaulted accounts. Not just anyone can see this information. This information, which is known as CAIS (Credit Account Information Sharing) can only be seen by the subject of the credit report (i.e. the consumer) or the lenders who supply similar information. This rule is part of the Principles of Reciprocity. In simple terms it’s a data sharing agreement, and for a lender to see CAIS information they must supply CAIS information. They cannot see just anyone’s information though; only information on those who have applied to them for credit may be viewed. When applying for credit there are terms and conditions, and data protection agreements, to sign. Acceptance of these is providing permission for lenders to use the information for the purpose of credit risk assessment, and potentially additional analysis to aid internal strategies, all with the aim of ensuring responsible lending.
If the lender has permission to view the data that is required \ requested for the analytical work, then the discussions can continue, and work can commence.
Although there are a number of further questions that will be asked before any analytical work will commence, these three questions are of the upper most importance. Analytical work cannot be conducted on data that is not permitted for that use, or provided to those who do not have permission to see it. Everyone here at Experian has a role to play in ensuring this is the case, and ensuring that lenders can act responsibly.