The Financial Conduct Authority (FCA) has launched a market study to examine how the credit information market operates and the impact it has on consumers.

The FCA said the market study will focus on three themes:

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  • the purpose, quality and accessibility of credit information
  • market structure, business models and competition
  • consumers’ engagement and understanding of credit information and how it impacts their behaviour

It said in exploring these themes, the market study will assess how the sector is working now and how it may develop in the future. It will also look at how the markets for credit information work in some other countries and what the UK market might learn from them.

The FCA said it will report on its preliminary conclusions on these themes in Spring 2020 including, if appropriate, a discussion of potential remedies.

It is not formally consulting on the Terms of Reference, but welcome any views on them by the end of July.

The FCA wrote: “Firms use credit information when assessing credit risk and affordability. Therefore, it can impact how likely consumers are to be able to access a range of financial services, including mortgages, loans and credit cards and, in some cases, how much they pay for them.

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“This is significant as, according to the FCA Financial Lives Survey, nearly 4 in 5 adults hold at least one credit or loan product. Furthermore, those vulnerable customers for whom a lender’s decision is more finely balanced are most likely to be affected if the credit information market is not working well.”

Christopher Woolard, director of Strategy and Competition at the FCA, said: ‘We have launched this market study as we have identified concerns about the coverage and quality of credit information, the effectiveness of competition between credit reference agencies, and the extent of consumer engagement.

‘Through the study we will seek to get a better understanding of how this vital market works and will identify remedies, where appropriate, to make it work more effectively for credit information users and individual consumers. This includes considering whether vulnerable customers are disproportionately affected by the way credit information is used, and whether any alternative approaches might deliver better outcomes for consumers.’

This is the most recent FCA review that could impact the motor finance market. In March, its review into motor finance singled out commission models as a concern that could lead to market intervention.

In March the regulator also increased the limit that the Financial Ombudsman could fine businesses to £350k.