James Tew highlights some of the
problems associated with credit applications
There are few products in the world where
suppliers are as fussy about their customer’s profile as finance.
The only consideration prior to credit application process is
payment or rate, which, though important, is trumped by the
creditworthiness of the applicant.
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Most scorecards still penalise for multiple
credit searches and rate-conscious customers can quickly impair
their credit file.
This is compounded by the complexity and
diversity of motor finance. The transaction involves extensive
research by the consumer, for vehicle and finance offers, hours of
the dealer’s time, test drives, the part exchange, taking of
deposits, order forms, finance applications and then bang! – they
get declined.
Understanding the viability or propensity for
approval of finance earlier in the sales process therefore makes
sense, yet this is problematic. Consumers can obtain their credit
file but they wouldn’t want to pass this to their local dealer.
Even if they did, I doubt whether a typical dealer could interpret
the file to underwrite the deal, as the bureau data is only part of
the decision-making process.
The logical step would be to allow a third
party to manage this for the customer and dealer, and thus improve
efficiencies for all parties, including lenders. All dealers need
is an understanding of whether the customer fits the criteria of
one or more of their panel of lenders. And consumers want to know
whether they will be approved and how much will it cost. This is
where we get into real difficulties.
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By GlobalDataSCOR (Steering Committee on Reciprocity) is a
forum made up of the credit bureaus and trade bodies that make up
the UK lending fraternity including the FLA. It decides who can
access consumer credit data and how. The current hot potato is the
use of credit bureau data by third parties where permission has
been expressly granted by the consumer.
Banks don’t like disrupting the status quo and
some are likely to oppose companies influencing the customer’s
options. It begs the question: whose data is it? What we do know is
that any consumer can physically pass their credit file to another
party and any attempt to stop this will no doubt breach numerous
legal rights of the individual.
Although SCOR describes itself as a forum, it
does appear to influence access to credit information. In an era of
Treating Customers Fairly, it will be interesting to see how this
plays out.
James Tew is CEO of Webzation Ltd
