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FCA warns financial firms about data transparency

Charles Randall, the Financial Conduct Authority (FCA) chairman, speaking at an event organised by Reuters news agency, warned that there is a case for new regulation for financial service companies. This would make them transparent about the way they use their customer’s personal data.

When people apply for loans or credit, a lender may use software that analyses personal data. Some financial organisations are developing artificial intelligence software to make loan decisions based on a customer’s personal data. There have been experiments in using social media platforms such as Facebook to find records of a customer’s personal life, their hobbies, habits and social action. This personality profile can be used to help make loan decisions and influence the cost of financial products.

Under the General Data Protection Regulations (GDPR) business have to seek permission for how they use customers’ data, but the FCA hinted that greater regulation was required. Charles Randall asked:

“Should all businesses have a data charter? Should these be developed through voluntary codes of practice? Will the industry take the lead or should they be a regulatory requirement?”

Alternative bridging lenders usually use human underwriters to make decisions about bridging loan applications. Specialist lenders are more concerned about the value of the deal the loan is for, the value of the assets used as security and the exit strategy of how and when the loan will be repaid. They are less concerned about the personal life of the borrower or if they have an unblemished credit history.