Will Mason, CEO and co-founder of Infact – the first real-time credit reference agency, sets out the challenges facing the traditional players image credit shutterstock

The UK’s credit reporting system is struggling to keep pace with modern lending. As complaints to the Financial Ombudsman Service jump 40% year-on-year and Claims Management Companies increasingly target lenders over affordability and responsible lending issues, a concerning pattern emerges – outdated credit information is failing both consumers and lenders.

Recent FOS data shows credit card complaints reached record highs, with 55% relating to unaffordable or irresponsible lending – up from 20% the previous year. This surge points to a fundamental problem: lenders are making decisions using affordability and credit data that can be 30-45 days old in a world where consumers can obtain multiple credit products within minutes.

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Under the FCA’s Consumer Duty, lenders must ensure good customer outcomes and demonstrate they’ve properly assessed affordability. Yet the current credit reporting infrastructure, built on legacy technology and monthly reporting cycles, makes this increasingly difficult. The result is a growing disconnect between regulatory expectations and lenders’ ability to meet them, leading to costly complaints, operational burdens, and potential harm to consumers.

Impact on lenders

The costs of outdated credit information systems create significant financial and operational burdens for lenders. Recent FOS data shows credit card complaints reached a record high of 5,660 in Q3 2023/24, up 76% from the previous year. The direct costs of these complaints are substantial. Each FOS complaint incurs a £650 case fee regardless of outcome, while the operational impact of processing complaints creates additional strain. This was starkly illustrated when Vanquis Banking Group issued a profit warning in March 2024, citing the administrative burden of processing a surge in consumer complaints even though “the vast majority of these claims are not being upheld.”

Impact of the rise of claims management companies

The rise of claims management companies (CMCs) compounds these challenges. Nearly three-quarters of credit card and unaffordable lending complaints now come through CMCs, compared to just a quarter in 2022/23. While the FOS plans to introduce CMC fees to reduce spurious claims, lenders still face significant costs in:

  • Processing and investigating complaints
  • Training and maintaining specialized complaints handling teams
  • Managing regulatory reporting and oversight
  • Potential redress payments
  • Reputational damage and lost business

Beyond complaint handling, outdated credit information forces lenders to maintain complex workarounds and multiple data sources to assess creditworthiness accurately. Each mismatched identity or outdated credit report triggers costly manual reviews and customer service interventions. Without real-time credit data, lenders also face increased risk of loan stacking as consumers can obtain multiple credits within days without detection, creating additional exposure to regulatory scrutiny and potential Consumer Duty violations.

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The human cost

For consumers, the impact is equally severe. Identity mismatches can lead to wrongful credit denials or higher interest rates. Those working to improve their credit profiles must wait over a month to see positive payment behaviour reflected in their scores, potentially missing out on better rates despite demonstrated responsibility.

The system particularly disadvantages younger consumers and those new to credit. The monthly reporting cycle turns what should be a few months of responsible credit usage into a much longer journey, often pushing people toward more expensive credit options. For those experiencing financial difficulties, the delay in reporting positive changes can extend their period of financial exclusion.

Path to modernisation

The solution lies in modernising credit reporting infrastructure to match the speed of modern finance. Real-time credit reporting would enable more accurate lending decisions based on current data, while helping consumers build credit profiles more efficiently through immediate recognition of positive payment behaviour.

The technology exists today to enable this transformation. Person-centric matching using alternative identifiers like email and mobile numbers, combined with API-driven real-time data sharing, could dramatically improve accuracy and timeliness. The question is not if this change will happen, but whether we’ll act before more consumers and lenders suffer the consequences of our outdated system.

Will Mason is CEO & co-founder of Infact – the first real-time credit reference agency