Nationwide has implemented the Consumer Indebtedness Index from Experian as an additional aid to help tackle consumer indebtedness.
The CII has been developed as an aid to responsible lending and is being used by Nationwide to improve the quality of its credit granting decisions. It is designed to help identify individuals who may currently be able to fulfill their current repayment obligations but whose overall level of indebtedness means that they would struggle to keep up with their payments if they were to increase their commitments.
Experian says that whilst the great majority of consumers in the UK are adequately managing their credit commitments, a small minority, 6.9% of the UK's 'credit active' population is on the brink of financial difficulty because they have already borrowed as much or more than they can afford.
The CII has been designed to identity those very individuals who are currently up-to-date with their payments but are struggling to manage their debts and likely to be in difficulties in the future if they take on more debt.
Roger Williams, head of retail credit risk for Nationwide, says: “We are committed to responsible lending and welcome new initiatives, such as the CII, as a means to reduce the risk of consumers becoming overindebted. With Experian, we are taking a major step forward and have found the CII to be highly predictive. Because the CII is able to provide a specific measure of indebtedness, it is helping us to more accurately assess applications for credit and consumers' potential ability to repay new and existing commitments.”
Tim Morris, director and general sales manager in Experian's consumer business, says: “We are heartened at the number of lenders, including Nationwide, who are already using or plan to use the CII in the near future.”