Experian launch 'big picture' debt service

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The Experian Collections Bureau is being marketed as a method of ensuring "customers are treated fairly and responsibly" when they owe money.

The agency says most lenders have only a limited view of their customers' overall financial situation - so when someone misses a payment it's difficult to know how serious an issue it is and act accordingly.

Growing problem

Experian say that in 2013, 88% of businesses were affected by late payments, while one in five people purposely missed a repayment of some kind because they couldn't afford the minimum amount.

The agency says the practise is becoming more common.

They add that with the rise in the number of households facing financial difficulties, managing debt for both businesses and customers is increasingly important.

As the UK's most frequently used credit checking agency, they have a lot of information to hand - more than 17 million records from a variety of sources, including details of an individual's payment history, debt problems and so on.

They say bringing all of those records together will allow their clients "to build smarter collections strategies which are fairer to the customer".

Basically, it's a tool to show companies how much people who owe them money can afford to pay.

That may sound harsh, but such a tool does have a lot of value for both companies and their customers.

On the business side, it costs to chase up debts - costs that often end up being passed on to other customers.

On the customer's side of the equation, the extra stress of being hassled to repay debts they can't afford can push them into even bigger problems as they try to find the money to quiet one creditor at a time.

One of the roles debt advice charities play is to help their clients work out a repayment plan they can stick to, even if the sums scheduled for each creditor seem trifling.

For those creditors to be able to see the extent of someone's debts, and what they can actually pay, could go some way to helping smooth that process.

But how has it taken until now for this kind of service to become available?

Data sharing

In its investigation into payday lenders, the Competition and Markets Authority proposed better real-time data sharing.

This, it says, would help lenders see what other commitments a potential borrower has during the loan application process.

The collections bureau is coming at this from the other side of the equation - that is, it's providing information on a customer's debts and issues assuming there's already a problem.

Admittedly this is a much easier service to set up - after all, the records are already there, and it's more a case of collating and presenting them.

But there would seem to be nothing to stop companies from using the collection bureau service as another part of the application process.

StepChange Debt Charity say 20% of people seeking their help with payday loan debts have five or more high cost loans, with head of policy Peter Tutton saying:

"Too often firms are unaware of whether people have existing payday loans with other lenders and then compound financial difficulties by offering further loans."

So while we wait for the introduction of a real-time data-sharing system, this is at least a step towards enabling companies to see what debts potential customers already have.

What about standard credit checks?

Credit checks are a frequent part of modern life, with most being carried out by one of the three biggest providers - Experian, Equifax and CallCredit.

To pick on them again, payday lenders are supposed to gather evidence of their customers' disposable income to assess the affordability of the loans they apply for.

That the FCA had to announce a commitment to making sure such checks are carried out says something about how many lenders actually complied.

Yet anyone can order a copy of their basic statutory report from any of the agencies for £2, or sign up for a more detailed report - our guide is here.

Here's the interesting part: CheckMyFile provide customers with the chance to see a credit report containing information from those three agencies.

Again, it's worth asking: If a consumer credit checking site can offer collated information like this, why has it taken so long for businesses to get an equivalent service?

Aiming at the wrong target?

To say the Experian Collections Bureau will ensure the fairer treatment of people in debt seems a bit rich.

It may well help ease the pressure on those struggling with numerous debts, but it's doing little to address the source of the problem.

And given that a lot of that problem is caused by seemingly wilful ignorance of the data already available, will it make that much difference?