The social impact of our products
This section highlights a number of issues specific to the financial services and retail sectors - both of which are strongly represented in Experian’s client base – and shows how Experian is tackling each.
Addressing the needs of underserved markets:
Historical lack of investment coupled with perceptions of risk and disruption mean that many deprived urban areas are commercial no-go areas. The social consequence is that residents do not have access to essential goods, services and (perhaps most importantly) employment opportunities and what little wealth there is in the area ‘leaks out’ as residents are forced to shop elsewhere. These areas are increasingly being described as ‘underserved markets’, linked to a realisation that they offer retailers and financial services companies access to new markets and commercial opportunities, whilst promoting local regeneration. However, significant barriers often prevent investment, particularly when companies are faced with the choice between investing in a deprived area and a more affluent one. In the public sector there are important questions of targeting resources onto the sections of society most in need of them.
What is Experian doing?
Experian used its data assets and expertise to support a major project on underserved markets, led by Business in the Community and supported by the Office of the Deputy Prime Minister. Details of the initial project can be found in last year’s CR Report. Since then Business in the Community has created the Business Action on Economic Renewal Team headed by Sir Stuart Hampson to focus on business’ role in the revival of local economies. Experian is the research partner.
In a similar vein Experian has developed Mosaic Public Sector, which is a classification which provides a detailed insight into socio-demographics, lifestyles, cultures and citizens’ behaviour. It identifies 11 groups of people and 61 types from a public sector-focused perspective, including ‘Symbols of Success’ - career professionals living in sought-after locations; ‘Happy Families’ - younger families living in newer homes; ‘Welfare Borderline’ - people living in social housing with uncertain employment in deprived areas; and ‘Blue Collar Enterprise’ - upwardly mobile families living in homes bought from social landlords.
This deep understanding of citizens can be used to help shape public policy, giving organisations such as local police forces and health authorities a consistent and systematic way of analysing demand for public services, right down to household and postcode level. By targeting the right services and communications to the right communities, Mosaic Public Sector helps ensure that resources are delivered with real efficiency and value for money. For example:
- Huddersfield Primary Care Trust (PCT) used Mosaic Public Sector to help define areas of deprivation and poor health so it could target its resources accordingly.
- Slough PCT used Mosaic Public Sector to help pinpoint those most at risk of diabetes, who may not have been diagnosed – rather than relying on estimates.
- Greenwich Teaching PCT used Mosaic Public Sector to define areas of good and poor health and the five conditions likely to generate high levels of hospital admissions, so it could target resources more effectively.
- The Sussex Police Force used Mosaic to help determine households most at risk from burglary and explain why, enabling it to put prevention plans in place.
Helping clients and their customers avoid over-indebtedness:
Credit allows consumers flexibility to manage fluctuations in income and expenditure and the majority of consumers manage that facility without difficulty. However, for a minority, credit or pressure in keeping up with household bills can lead to over-indebtedness. The individual costs of over-indebtedness can be substantial, including loss of the family home, depression and relationship breakdown.
What is Experian doing?
Experian provides its clients with – and facilitates their sharing of – the information which allows them to see a wider picture of the credit behaviour of consumers with whom they are already doing business or who have applied to them for credit. There is increasing pressure for lenders to provide evidence that they lend responsibly. Experian has devised two scoring indices – the Consumer Indebtedness Index and the Affordability Index – to help lenders identify individuals at risk of over-indebtedness. These tools provide a more sophisticated approach for lenders wishing to understand a consumer’s likelihood of getting into financial difficulty in the near future.
But it is also important that consumers understand the credit-granting process, enabling them to manage their own credit and debt so that they can be responsible borrowers. Experian’s well-established consumer education programme contributes to the public understanding of how credit works in a variety of ways. A range of free ‘Credit Crossroads’ advice guides in the UK, offering advice to consumers at specific times (e.g. when moving home, on credit being refused, on becoming a student, being made redundant, at the death of a family member, during relationship breakdown, or if identity fraud is suspected etc), are made very widely available. 2006 saw the launch of a new series of 'basics' fact sheets, available on Experian’s website or in hard copy. The first of these fact sheets - Your credit report and the electoral register - was launched in February 2006 and answers common questions about credit reports, applying for credit and the electoral roll.
Experian Americas also has a consumer education outreach program, which supports national financial education initiatives and participates in various influential consumer groups. Experian consumer education materials have been developed to explain in simple terms how credit reporting and direct marketing work, the benefits of such services to consumers, and how consumers can be involved in the processes. The materials are distributed through a wide range of channels including US legislators, consumer advocates, credit counsellors, universities, high schools, estate agents, marriage counsellors, divorce lawyers and others who are in a unique position to share this important information when the consumer needs it.
Experian has worked closely with the Financial Services Authority as contributors to the Financial Capability Initiative, particularly by producing and donating an on-line tool (The Debt Test) to help consumers judge whether or not they are, or could be, on the brink of over-indebtedness. Consumers using the tool answer questions on their finances and the system then provides tailored advice on their credit situation and signposts them to further sources of help or information as appropriate. You can take The Debt Test.
Experian works very closely with consumer groups, educators, the media and money advice organisations to help educate and inform the public over credit issues. Its partners in this area include the Money Advice Trust, Citizens Advice, National Debtline, the Trading Standards Institute and the Consumer Credit Counselling Service. Direct in-kind support is provided to debt counselling organisations including CCCS, National Debtline and Payplan in the form of credit reference training sessions and informative presentations to front-line employees. Partnership with Citizens Advice includes sponsorship of their presence at the UK’s political party conferences, ensuring MPs, senior Civil Servants, councillors and local politicians are aware of the help available to citizens on credit and related matters.
Home credit and sub-prime lending:
Home credit is the provision of small unsecured cash loans (generally £200 to £300) repaid in fixed cash instalments, collected by agents who call at the customer's home. These consumers are generally unable to access other forms of credit for a variety of reasons, including the fact that they sometimes have little proof of any past credit activity or because they have a poor credit history or, sometimes, because the perception is that they would not be suitable for mainstream credit products.
What is Experian doing?
Experian is working with the Consumer Credit Association in the UK to enable data about home credit products to be shared within the wider credit industry, thus allowing consumers to benefit from evidence of their ability to maintain credit agreements. In some cases this will enable consumers to obtain credit at less expensive interest rates. Experian is recognised in the Americas as a leader in the push to augment credit files with non-traditional data for the purpose of assisting consumers who currently have thin or no credit files.
Access to products and services:
Customers expect a large variety of tailor-made products and services to suit their particular circumstances and for these to be provided in a flexible way, for example, through the Internet. This is particularly useful for those unable to access traditional services, such as those people with disabilities. This shift in emphasis has brought new issues of accessibility and inclusion for companies to consider, for example as banks have closed local branches. This prevents access for a different segment of the community, such as those who do not have access to the Internet or can’t travel, such as pensioners. Maintaining this balance is vital to the future of financial service companies.
What is Experian doing?
Experian has a fast-growing business providing consumers access to their credit report information via the Internet. This service (known as CreditExpert) now has millions of users worldwide who, once they have passed rigorous identification checks, have unlimited online access to their up-to-date credit report information with regular alerts by e-mail or SMS text when significant changes take place.
Experian in the UK has a statutory duty to provide credit reports on request for the payment of a nominal sum and its Consumer Help Service deals with 3,000 requests every day. In recent years Experian has provided consumers with new ways to apply for their information and there has subsequently been rapid growth in the number of credit report applications received online and via the automated call transcription service.
Changing patterns of requests for Credit Reports:
In the US, Experian's National Consumer Assistance Center (NCAC) is Experian's link to consumers. Because Experian maintains a database of credit information on more than 205 million consumers, federal law requires that the company provides knowledgeable, trained representatives to assist consumers who have questions about their credit files. The NCAC provides copies of credit reports, and communicates with consumers who wish to question or dispute their accuracy or completeness. The Center provides special assistance for victims of identity theft or fraud, Spanish-speaking customers and consumers with mixed files.
Privacy and identity fraud:
Identity theft has become the fastest-growing type of fraud in the UK and – according to the Home Office - already costs Britain £1.7bn a year. With the increase in online retailing and other internet services, there is a danger that this will continue to grow. Financial services companies and retailers are acutely aware they have a role to play, particularly as they often bear the brunt of costs from fraud. However, tighter restrictions on the way information is collected and used may also restrict the variety and flexibility of products and services that can be offered to the consumer.
What is Experian doing?
Experian has quite deliberately positioned itself at the forefront of measures to combat identity fraud, seeing both the social and commercial benefits of doing so. The company has done much to ensure the topic is widely discussed – by conducting research into bin raiding ('dumpster diving' in the US), by providing speakers for relevant conferences and by partnering with fellow businesses and with government, including the Home Office, the police and other agencies in initiatives aimed at raising consumer awareness of how to combat this type of fraud. Experian has made a wealth of material and statistics available to the media in order to ensure consumers know they should shred all unwanted documents containing personal information and refuse to divulge personal details to cold callers, by e-mail or to unknown websites. It has developed a range of consumer authentication products, which banks, lenders and official organisations can use to verify consumers’ identities online, ensuring that consumers, businesses and public bodies are protected from fraud but consumers are still able to enjoy fast and convenient access to services.
In 2006, Experian launched a dedicated section on identity fraud in the Consumer Advice pages of its website. These pages explain what identity fraud is, how to guard against it and what they should do if they think they may be a victim. They include detailed case studies, current trends, Experian press releases and links to other useful organisations.
Financial literacy and Information asymmetry:
The financial services and retail markets in the UK and US are increasingly sophisticated and there is some danger that the range and complexity of products is increasingly baffling to certain sectors of the population. Increasing demands on available financial resources, particularly within families, and the consumer appetite for goods and services, make it more important than ever that all consumers have access to information and are helped to develop the skills to manage their own finances.
What is Experian doing?
Experian is playing an important role in helping improve consumers’ financial skills, through contributions to national financial capability projects and membership of working groups, including those led by the Department of Trade and Industry and Department for Work and Pensions, the Office of Fair Trading, the Financial Services Authority and the Personal Finance Education Group (PFEG). Experian provides information and free guides, particularly seeking to promote financial understanding, responsibility and good money management among students and other young people. Experian has also worked with the Basic Skills Agency to produce a tutors’ guide for adult numeracy and literacy classes based on Experian’s consumer education literature. ‘Getting Credit’ takes students on a ‘credit journey’ to explore what credit is, applying for credit, the role of the credit reference agencies in this process and getting the best credit deals. The pack aims to help learners make sense of credit and contains lesson plans and information materials for six 1.5 hour lessons including student worksheets, information flyers, quizzes, tutor materials and a CD ROM. ‘Getting Credit’ has been awarded the PFEG quality mark.
Experian has also partnered with The Times 100 to produce a case study for use by business studies students in schools and colleges that explains the role and obligations of the credit reference agency at the same time as providing analysis of how the company has reacted to external influences.
Experian Americas offers an online consumer advice column - Ask Max. Max is Maxine Sweet, Vice President, Public Affairs, and the column appears every two weeks. Since its inception, consumers have submitted more than 1,000 questions each month, and the most common and most unique questions are answered in the column. Responses have covered everything from bankruptcy to transvestite name changes. All of the responses are archived and can be searched by date or subject. The company provides educational materials to American consumers. These materials cover a wide range of subjects including home buying, divorce, establishing new credit, fraud prevention, Q&A, and a ten-part series entitled “Reports on Credit”.