Payday firm data service launched

A new service to help payday lenders improve decisions about who they should grant a loan to by giving them a more up-to-date snapshot of a consumer's borrowing habits has gone live.

A real-time information-sharing service for payday lenders has been launched by credit reference agency Callcredit
A real-time information-sharing service for payday lenders has been launched by credit reference agency Callcredit

Wonga, QuickQuid, Pounds to Pocket, Uncle Buck, Mr Lender, Peachy and Sunny are among those who have signed up to the real-time information sharing service, which is called Moda and has been launched by credit reference agency Callcredit.

The service has been developed in response to concerns that lenders should have the most up-to-date and accurate picture of a potential borrower's circumstances when they make a loan request.

Lenders started testing the system in April and have been using it to share updates of information on a daily basis. The system has the capability to eventually allow lenders to share information about consumers' borrowing habits every 15 minutes.

Previously there was a 30-day time lag for such information to be shared, which is not ideal for the fast pace of the payday loans industry, with the average loan only lasting 22 days.

Moda will report on key changes in a consumer's credit file. These include new account openings and significant changes to existing accounts, such as overdue payments, rectified and settled accounts, rollovers and credit extensions.

It is hoped that this rounder and more timely picture of a consumer's borrowing habits will help lenders make more accurate judgments about whether that person can afford their loan.

The Business, Innovation and Skills (BIS) Committee has previously called for better sharing of up-to-date information between payday firms so they can stop struggling borrowers from spiralling into further trouble by taking out multiple loans with different lenders.

Callcredit said that while those who have initially signed up are primarily payday lenders, it is also talking to a "wide range" of other lenders who are also interested in coming on board in the next few months.

Peter Mansfield, managing director at Callcredit, said: "The alternative lending market has come under increased scrutiny from its regulator recently and the need to lend responsibly has never been greater.

"Moda supports responsible lending by providing lenders with an up-to-date view of significant events on consumers' credit files on which they can base more accurate and responsible lending decisions."

The payday loans industry came under the regulation of the Financial Conduct Authority earlier this year.

Under the FCA's new rules for payday lenders from July 1, they will have to include risk warnings on print and television advertising. Payday firms will also be banned from rolling over a loan more than twice and they will only be able to make two unsuccessful attempts to claw money back out of a borrower's account by using a recurring payment.

The FCA will also consult this summer on capping the overall cost of a payday loan.

Earlier this month, the Competition and Markets Authority (CMA) found that a typical payday loan customer is paying up to £60 a year over the odds because of a lack of price competition in the industry.

The CMA, which will produce a final report later this year, is proposing that an independent price comparison website should be set up, giving consumers a clearer choice of lenders and the overall cost which is specifically tailored to their needs.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents short-term lenders, said: "Knowing a person's overall financial situation is undoubtedly better for both borrowers and lenders.

"That's why we support real-time credit checks as they will help lenders not only to identify customers who can afford to repay a loan but also those who apply for credit in the full knowledge that they can't afford it."