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New Report Warns of the Use of Non-Financial Behaviours in Credit Risk Assessment

Non-financial behaviours such as social media use and transactional behaviour may be used in future credit risk assessment with implications for access to consumer finance, according to a report released today (9th March 2020) by Registry Trust.

‘Futures of Credit Risk Assessment in the UK’ , written by Senior Lecturer Joe Deville of Lancaster University and published by Registry Trust, a non-profit organisation, examines developments in the way credit risk is assessed in the UK and draws on emerging international practices to explore what this might mean for consumers.

Deville reports that established methods such as analysing monetary judgment data will still to be central to credit lending decisions. Credit risk specialists interviewed for the report, including UK banking and credit referencing agency (CRA) representatives, are so far cautious about the potential use of internet and device data as a method of risk assessment. However, there is evidence of credit risk specialists expanding and diversifying the methods they use to assess credit risk and increased use of ‘big data’ credit scoring.

There may be possible benefits to borrowers from more holistic assessment of their financial status, but the emerging practices raise difficult questions about: the ethical use of some new data types; the criteria to be used to establish whether particular data are appropriate for assessing future financial behaviours and creditworthiness; who should be responsible for establishing these criteria; and issues of fairness.

Speaking on behalf of Registry Trust, Mick McAteer, Chairman said: “Expectations have been raised that greater use of ‘big data’ and new forms of risk assessment could transform how credit risk is assessed. So far, there has been little impact on consumers. But, the use of these emerging methods could become more widespread with potentially negative consequences for consumers. It is critical that regulators, consumer groups, and the industry preempt this and develop a robust ethical framework to protect consumers’.

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Notes for editors

Registry Trust is the Registrar for Judgments, Orders and Fines in England and Wales on behalf of the Ministry of Justice. The Register includes county court judgments, high court judgments, CSA liability orders, fine defaults and tribunal awards for England and Wales.

CCJs are removed from the register if paid in full within one calendar month of the judgment date, but will otherwise remain registered for six years. If fully paid outside the one calendar month, defendants can apply to have the judgment marked as ‘satisfied’ which will improve their credit rating.

Anyone may search for entries against a named person or business at a stated address or a corporate body in Great Britain, Northern Ireland and the Republic of Ireland by visiting Registry Trust’s website or by writing to Registry Trust, 153-157 Cleveland Street, London W1T 6QW.