The risk management expert believes that the new regulations, which require proof of income to assess consumer affordability, provide lenders with a real opportunity to improve lending performance. Central to achieving this is the need for wider data sharing.
Laurence Hamilton, Marketing & Performance Director, Equifax, commented:
“The Mortgage Market Review is very positive for the industry. It reinforces the practices already being followed by providers in collecting income data, so this shouldn’t add any extra burden to their operations. It also puts the spotlight on the importance of verifying income data for responsible lending, which we believe gives the industry a great opportunity to reduce bad debt risk.
“Equifax analysis has proved that verified income provides an immensely powerful indicator of affordability, with the potential to improve credit risk performance by up to 5 times. The challenge for credit providers is accessing verified income data as an integrated component of new credit application assessment.
“Income data is already being collected by mortgage providers. We are, therefore, working with these and other consumer finance organisations to facilitate sharing of this valuable intelligence through a series of tools that will enable them to comply with the new regulations as well as improve lending performance.”
Equifax is working with all sectors of the consumer finance industry to enable sharing of declared and verified income, which can then be integrated into application and customer management processes. “Having this data integrated into risk management processes means customer service levels can be enhanced,” continued Laurence Hamilton. “Plus, the significant improvement in performance that can potentially be achieved through the use of verified income data goes to the heart of reducing bad debt risk.”
