Brexit and The Credit Reporting Agencies
The Brexit is a hot topic, hugely debated, and currently one of the top news topics. In part due to the fact on October 31 of this year, we need to have a deal in place, or we will by default have a “no-deal” Brexit.
Brexit is also in the news a lot as it is a platform that whomever is to be our next Prime Minister is standing on. All candidates volley the Brexit back and forth, each with their own ideas and agenda as to how it should go down.
One question some people have, in addition to the hundreds of other questions, is how will the Brexit affect our insolvency laws here in the UK, and also our credit rating systems, and credit reporting agencies here in the UK?
Not much has been said of this, but there have been a few leaks and things mentioned recently.
In addition to all the other aspects and things we need to sort out when we leave the EU, we also need to address our credit systems here in the UK, and also our credit reporting agencies.
Currently we re a part of the EU, and there are regulations in place in the EU, that we must follow as we are a part of the EU. There are rules and laws, and the such to allow companies to work here and in the EU, and also be regulated here and in the EU.
Once we leave the EU, if without a deal, and these matters are not addresses, we are on our own, we will then regulate ourselves, so to speak.
And one of those areas is in the credit reporting business, and the agencies that report our credit files and credit scores.
What is ESMA?
ESMA stands for the European Securities and Markets Authority, and one aspect of what they do is to regulate or oversee CRA’s or credit rating agencies in the EU. This also includes our CRA’s here in the UK, however, without a deal to the Brexit, this all will change.
A statement by the ESMA outlines what will occur with the CRA’s in the UK should we leave the EU without a deal.
In essence this statement says credit rating agencies in the UK will be labelled and treated as “third-country” CRA’s and their registrations will be “withdrawn” and they will no longer meet the conditions as CRA’s as outlined in the EU.
FCA to Investigate CRA’s
The FCA or Financial Conduct Authority is the regulator in the UK for all things credit. If you wish to loan money, be a bank, most things financial, you need to be registered and licensed by the FCA.
This means that when the UK leaves the EU, the FCA will then become the regulator for CRA’s then in the UK.
The FCA has stated, “CRAs issue credit ratings which are opinions on the creditworthiness of an issuer or security. Firms may use credit ratings in the calculation of their capital requirements and for assessing risks in investment activity. If the UK leaves the EU without a withdrawal agreement, we will assume responsibility for registering and supervising CRAs in the UK.”
This means the FCA will regulate and govern the credit bureaus here in the UK.
FCA to Review CRA’s and “Credit Information Market”
Credit scoring is a huge deal and not just for taking out a loan. It can be used in issuing insurance policies, and also for some jobs.
So the agencies that issue our credit scores, need to get it right, and they need to be regulated to insure they get it right.
The FCA is now going to “launch an investigation” into the credit reporting agencies, to see how they operate, and what their impact is on us as consumers.
The Director of Strategy and Competition at the FCA, Christopher Woolard stated, “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.”
So the Brexit is to have some changes on our credit systems, how they are regulated, and also new licensing requirements.