LONDON - Abbey, Barclaycard, the Co-operative Bank and Egg have agreed to share data about their credit card holders in order to minimize the amount of bad debt faced by them. This agreement would men that the banks will now know the behavioral pattern of cardholders including the exact amount they spend each month.
"This move will improve our ability to make good lending decisions. Whether it's a customer applying for a card or asking for an increased credit limit, the better the information we have access to, the better chance we have of getting the decision right," said Gary Hoffman, Barclaycard's chief executive. He said that it was now up to the banks to ensure that they made the right decisions for customers as well as their own businesses.
Banks already share data about customers who have defaulted in loan repayments, but this is the first time that data on credit cards will be shared. Bad debts have affected the bottom line in banks this year with Barclaycard alone reporting a 17 percent dip in profits this year.
In fact the move to collaborate with other banks in this initiative was proposed by Barclaycard after chief executive John Varley spoke before the Treasury select committee in December last. Varley had wanted banks to stop lending to those who had fallen behind in repayments and were in severe debt. While this move has generally been welcomed, HSBC has expressed its misgivings about the arrangement.
"Our experience strongly suggests the first signs of a customer having difficulties can usually be seen in their unsecured personal loan, so a sharing agreement that does not cover this type of debt will be of limited use," said Martin Hagerty, the HSBC's head of retail credit. The banks said that the move would have limited success since the data being shared involved only four banks.
But a Barclaycard spokesperson said that they were hoping to rope in other banks into this venture for their mutual benefit.
Posted
on : Mon, 05 Dec 2005 06:45 GMT | Credit Cards News
By : Pippa Fielding
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