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What are credit reference agencies?

Who can access this information?

How are governments and local authorities already using this kind of information?

How else could the data held by agencies be used?

What about privacy issues?


What are credit reference agencies?

Credit reference agencies are commercial companies that compile information from a number of different sources.

They sell this information to lenders and other service providers in the form of credit reports which help them to decide whether to grant an application for a loan, credit card, or provide another financial product. Governments both local and central - also have access to the information in some circumstances such as detecting fraud, and this use looks set to be extended.

There are three major credit reference agencies in the UK - Experian, Equifax and CallCredit.


Who can access this information?

You can see your full credit report - and all three agencies allow you to do this, either for free or for a small fee.

Lenders can, of course, access the data when judging your creditworthiness.

The "public" information can also be seen by landlords and potential employers - though you must authorise this.

And while access is protected under the Data Protection Act, the police and government departments can also request to see information held about you in circumstances to prevent financial crimes such as fraud.


How are governments and local authorities already using this kind of information?

A common use for the data has been for benefits claimed on the grounds of living alone, for example the single person discount claimed on council tax.

Authorities can run checks on those receiving the benefit, and reference agencies will flag up when other people are also linked with that address - perhaps through bank accounts, mobile phone bills or simply the electoral roll. Further investigations can then be made.

"We can say with a degree of certainty, whether there is somebody else living at a particular address," said CallCredit's Owen Roberts.

He added other data could also help identify other potential frauds - for example, if somebody who claimed to have no capital was holding substantial savings, or if a benefit claimant had moved abroad.

A spokesman at Experian said the firm looked for "commonalities in applications".

"People sometimes make multiple applications for these benefits, and while they might use different names, some of the other information will be the same, so we're data matching and highlighting cases for possible investigation."

However, if there is a serious suspicion that a specific person is committing benefit fraud or another crime - perhaps following a tip-off - then authorities can request access to more detailed credit reports to strengthen (or indeed weaken) their case.


How else could the data held by agencies be used?

Government wants to be pro-active and have credit checks carried out on all new benefits applicants. Applying for benefit would involve agreeing that this information could be examined at the time of application.

"What's important is that people are notified at that stage. It has got to be transparent," said Neil Munroe, external affairs director at Equifax. "Then nobody can be surprised if that data is used."

"There will be more up-front checking because it's easier to prevent fraud at that stage than to identify it later and then try to recoup the money." However, he admitted it was a difficult and politically sensitive issue.

"People have a right to benefits and the government will have to work out how they handle those applications where there's a suspicion of attempted fraud."


What about privacy issues?

All the agencies stress that they are are bound by data protection legislation and that this is very strictly adhered to.

And given private firms such as lenders can get access to such information, the government argues there is no reason it should not be able to draw on such data.

To get access to more detailed records, central government and local authorities must show that they have a reason to suspect somebody is fraudulently claiming a benefit.

"It's not a case of giving unfettered access to our databases to let government departments snoop on what they want," said Mr Munroe at Equifax.

He added there had been "difficult conversations" with government departments over the sort of information that would be made available.

"This is not Big Brother," he said. "It's for the benefit of society and I think 99% of people will be comfortable with it when they understand it."


Information source

Majority of information taken and from BBC news: http://www.bbc.co.uk/news/business-10923819

Additional information added by CapacityGrid.