Banks plan to share cardholder data – but are they allowed to?

Thanks to my British friends for pointing me to this article by Dan Ilett in silicon.com, a CNET property in the UK (FYI, it's a way cool publication.)

Four major credit card issuers are planning to share cardholder information with each other and credit reference agencies.

Abbey, Barclaycard, the Co-operative Bank and Egg have said they will share cardholders’ “behavioural” data in a move they claim will “help identify customers getting into financial difficulty”.

The companies said they are looking to identify changes in circumstances that suggest an individual is experiencing problems with personal debt. The data will also be shared with credit reference agencies Callcredit, Experian and Equifax.

Data that will be shared includes the amount spent and repaid on a credit card each month, changes to credit limits, bounced cheques and spending patterns.

In a statement, Barclaycard CEO Gary Hoffman said: “This move will improve our ability to help customers by making better lending decisions. Whether it's a customer applying for a card or asking for an increased credit limit, the better the information we have access to, the better chance we have of getting the decision right.”

There are laws around how customer data should be used, particularly in ensuring shared data is not used for marketing purposes. But the banking industry has shared data about customers who have fallen behind on payments since the late 1980s.

Today the Information Commissioner's Office, which regulates how consumer and business data is used by companies, said it is investigating exactly what the banks are trying to do.

A spokesman for the department told silicon.com: “We've been in touch with the banks about this and we are currently looking into it.”

Clive Davies, a partner at technology law firm Olswang, said there could be some sticking points in the plan.

He said: “I think there may be confidentiality issues. When you enter into a credit card agreement you probably sign something where you give consent for data to be used with that company. What you probably don't do is give consent to share that information and let companies check you as big brother would to see if you have too much credit.”

According to Barclaycard, MBNA and Nationwide are also supporting the scheme.

This seems to raise almost the same issues as the court decision described here.