In conjunction with a new industry initiative to improve banks lending decisions by the increased sharing of customer information, Egg is calling on the government to do its part in raising responsible lending standards and share student loans data.
Today Barclaycard, Abbey and the Co-operative Bank announced plans to share additional customer data on credit cards, which will help to identify customers before they get into financial difficulty. In addition, Egg is calling on the government to match the industry led initiative and allow the Student Loan Company to share both positive and negative information.
Egg is backing Ralph Seymour-Jackson, chief executive of the SLC, in his recent request to the Department of Education and Skills to change its rules so that the SLC can start to share data with the rest of the lending industry. However, Egg is calling on the DfES to go further than simply sharing information on defaulting customers because it believes in order to raise responsible lending standards, full data sharing including balances and behavioural details are needed.
The proposed sharing of default information does not prevent students or graduates from falling into financial difficultly, but it does signal to other lenders not to lend to those already in trouble.
The industry initiative will see the companies sharing behavioural data – helping to identify changes in circumstances that suggest an individual maybe experiencing problems with personal debt. This data will be shared through the main UK credit reference agencies, Experian, Equifax and Callcredit. For the first time is will include information such as how much is being spent on the card and how much is repaid each month, as well as how much cash has been taken out and how many people can use the card. In additional, it will also include any recent increases or changes to credit limits and any cheques sent for payment that bounce.
Paul Gratton, chief executive of Egg, says: “The government can no longer ignore the need for the Student Loan Company to share lending information. With 3,000 tuition fees being introduced next year and the ability for students to pay these fees with a student loan, we can expect a significant hike in the amount of money it lends. By sharing their information, the lending industry will be better placed to help young people manage their borrowings and avoid financial difficulty.”
He adds: “Its crucial the government opens up data sharing on student loans now. By the summer of 2009, students could be graduating with debts relating to tuition fees of 9,000, if you add any further borrowing to cover living costs then loans could run into the 10,000s for many students. It is in everyones interest for banks make the best lending decisions and to do this they need to be aware of a customers existing financial position.”
Eggs own research found even though the vast majority of students claim they are concerned about the level of personal debt they have as a result of being a student, three out of five claim that they “will definitely use credit cards as a means for spending in the future”.