| BRUSSELS 2007! Workshop 4: "Scoring and Social Discrimination in Credit Contracts" - OUTLINE |
W4: SCORING AND SOCIAL DISCRIMINATION IN CREDIT CONTRACTS
Melina Mouzouraki (EKPIZO, Greece, Chair); Mike Bradford (Experian); George Wilkinson (Eurofinas/GWA); Hubert Van Tol (NCRC, USA); Fréderic Rottier (Observatoire des Crédits et de l'Endettement, Belgium); Joop Lobstein (BKR, Netherlands)
Held on Friday Sept14th at 3.30pm, concurrent workshop is W3 on Financial Education.
Credit scoring has changed the face of consumer lending in North America and may soon do so in Europe as well. Using information from credit applications and, where available, credit bureaux, scoring allows lenders to understand a customer’s total credit commitment and to react accordingly.
Even though the use of credit scoring creates the acknowledged benefits of significantly lower costs of granting small credit and subsequent broader access to these credits, there remain large stakeholder uncertainties over the desired extent of automation, collection and sharing of data. Objections vary but include fears of: (1) an over-reliance on past history rather than on the future profitability of investment allowed by the credit; (2) the use of private data for profit-driven purposes, a use that potentially conflicts with privacy regulations; (3) the lack of transparency in developing the scoring methods, making it difficult to challenge decisions made on the basis of incorrect information.
Credit reporting agencies in Europe have much less information than their North American counterparts and the information collected varies substantially across countries. For example, the state-run agencies in Belgium and France are forbidden to provide marketing services or credit reports, only negative incidences are recorded in France, and there is an obligation to explain a negative credit decision in the Netherlands. In their efforts to integrate retail credit markets, EU policymakers have grown increasingly frustrated with this diversity of credit reporting systems. However, an increasing number of countries with public registers have become members of the memorandum of understanding which allows the exchange of data between them and providers. In addition, there will likely be an expansion of this exchange to include data on individuals. Elaborating areas of consensus would be useful and not impossible judging from reactions to the Consumer Credit Directive proposal from both the consumer and provider sides.
Data protection issues will also be discussed, including the extent of the information covered by the signature of the consumer and the length of time for which the information can be stored. How can one ensure that data is used solely for the prevention of over-commitment, when it already also serves the purpose of identifying fraud and money laundering, and even supports debt recovery and debtor tracing in some countries? What are the limits on the use of the data, when initiatives taken by some banks include their sharing of information on active overdraft accounts? The exchange of views brought about by this workshop is especially important in the context of continued development of data sharing, encompassing ever wider areas of data and community of sharers — including credit card providers sharing information on consumers who have only ever made the minimum payment or door-step lenders sharing data on their clients — offering providers and regulators a whole new level of intelligence. |
| ID: |
40053 |
| Author(s): |
iff |
| Publication date: |
14/09/07 |
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Created: 27/08/07. Last changed: 27/08/07.
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