In a move to counter what it calls the UK's over-indebtedness
the DTI wants to share information on 40 million bank accounts to
prevent their users borrowing too heavily. It will consult with
industry on four plans, two of which involve ordering that debt
data be shared.
The accounts involved were opened before banks routinely asked
permission to share account data with credit reference agencies.
Mostly they are accounts opened before the late 1990s. That means
that there is no permission from users for the sharing of
information and these account holders cannot be subject to
now-commonplace credit checks on those accounts.
"As part of our over-indebtedness strategy we want lenders,
where appropriate, to share relevant data about the amount of
credit that is available to an individual consumer and their credit
use, and to use this information to make responsible lending
decisions," said Ian McCartney, Minister of State for Trade,
Investment and Foreign Affairs in the introduction to the
consultation document.
"I recognise the current good work of the credit industry in
sharing more data, and in developing new ways to predict and
respond to over-indebtedness, through data sharing. This can only
help lenders and borrowers alike, to minimise levels of bad debt,"
he said.
The document makes four proposals. Two of those involve ordering
that data on these accounts be shared. While one of the proposals
allows account holders to 'opt out' of having their data shared,
the other has no such provision, leaving the user with no choice
about the sharing of data.
The paper is a consultation document and is designed to provide
a starting point for consultation with the financial services
industry and consumers' groups.
The paper does say, though, that the DTI's preferred option is
so-called option 3, which involves ruling all the data available
for sharing but allowing customers to opt out of the sharing. That
option, said the paper, would require legislative change in order
to be legal, it said.
That proposal will conflict with existing data protection
legislation. "It is clear that the government is seeking to put
data sharing of financial details on a statutory footing but it is
unfortunate that the consultation document expresses this intention
in terms of "circumventing existing data protection
legislation" – the phrase used in connection with Option 3
which is the government preferred option," said Dr Chris Pounder, a
data protection specialist with Pinsent Masons, the law firm behind
OUT-LAW.
Pounder said that the consultation may be seen as window
dressing, since it is clear which option the government prefers.
"There is a risk that many will see the objective of the
consultation exercise as not one of "should we share financial
data?" but rather one of gathering evidence to justify an action
the Government has already decided to take," he said.
The DTI says that around 40 million bank accounts exist whose
data cannot currently be shared. It estimates that 33 million of
those are currently active.
