The nation’s largest credit reporting bureaus began enforcing rules this month that would prevent banks and other lenders from accessing certain credit data if they do not report the full range of credit information about their own customers.
Banks and other institutions use information from the bureaus to pre-screen prospects for direct marketing offers and also in the underwriting process. Some banks, however, have been withholding information about some of their most profitable customers to prevent them from being targeted by competitors.
“We think it’s an outrage that some banks are withholding information,” said Konrad Alt, a spokesman for Providian Financial Corp., San Francisco, adding that Providian welcomes any measures that put pressure on banks to fully report credit information about their customers.
Although reporting complete credit data allows banks to target other banks’ customers more effectively, it also benefits consumers, he said, by helping them improve their credit ratings.
The major credit reporting bureaus have begun applying some pressure. Trans Union, Chicago, as of Jan. 1 began enforcing its long-standing rules that limit the amount of customer credit data that banks can have access to if they do not report all the required customer data. Equifax, Atlanta, put in place a new rule that prevents banks from screening their prospect lists if they do not contribute data about their current customers. That rule is in addition to its provision that customers cannot perform “extracts,” or pull lists of customers from Equifax’s database, without providing data themselves.
Experian, Orange, CA, also was expected to enact some measures to encourage more complete data reporting.
Last year the Office of the Comptroller of the Currency warned banks that legislative intervention might be necessary. Sam Eskenazi, a spokesman for the OCC, said five federal agencies that oversee the banking industry were preparing to issue a statement on the subject probably in the first quarter.
“It’s been an issue over the past six months or so, because a couple of large issuers said that if some issuers do not report, why should they have access to data,” said Bill Rogers, executive vice president of Trans Union, who said his company was the first to take a stance on the subject of full reporting. “We had some customers where we had to say, ‘Look, either report us the data or we can’t do this,’ and it was financially painful. We lost some customers.”
Rogers said some customers that weren’t reporting all their data before have pledged to start reporting, but he added that a few customers have simply refused to provide data.
At Equifax, too, some banks have refused to provide information despite warnings that they will not be permitted to screen lists against the company’s database if they do not.
“We are giving them 90 days to comply,” said Paul Springman, senior vice president of American sales at Equifax. “But this is something we’ve had discussions with our customers with for the past six or eight months, so they’ve had plenty of warning. There will be some that don’t comply, and they will have to look for other ways to market to prospects.”
Springman said Equifax sent letters to its top 1,000 customers warning them about the new policy, and it is enclosing statement inserts this month for all its customers.
Much of the problem revolves around the “sub-prime” customers, who are higher risk and more profitable to banks, but some credit card issuers also have been withholding data about their customers’ credit limits, the credit bureaus said.
To address this problem, Equifax said it would no longer allow credit card issuers to use any criteria in their prospecting queries that they do not provide about their own customers.
