Merger of credit ratings firms could lower competition, CMA says

Written by Oliver Wade

The Competition and Markets Authority’s (CMA) Phase 2 investigation has provisionally identified that Experian’s purchase of ClearScore is likely to result in less intense competition, which in turn could damage the continued development of digital products.

The CMA referred the proposed merger between the two credit scoring firms Experian and ClearScore for an in-depth Phase 2 investigation in July, following immediate concerns that the deal could have a detrimental impact on the services provided to consumers.

The firms hold the top spots as the UK’s largest credit checking firms, with Experian offering both free and paid-for credit checking services, while ClearScore, which entered the market in 2015, quickly became the market leading free credit checking tool. Both companies also offer their customers comparison tools to assess third party lenders, such as credit card providers and banks.

Currently, competition between the 2 firms is helping to drive quality and innovation in both free and paid-for credit checking services as they develop their products to vie for customers. By taking one of the firms out of the market, the CMA’s provisional finding is that the merger would substantially reduce the pressure to continue to develop innovative offers and to make other improvements in services.

Inquiry chair Roland Green said: “Our investigation has shown that this is a fast-paced and evolving market, and that both Experian and ClearScore are an important part of that.

“The provisional findings in our investigation show that Experian’s proposed takeover of ClearScore is likely to weaken competition in the sector and have a negative effect on the services offered to customers.”

The CMA has asked for views on these provisional findings, and requested that they be submitted by 19 December 2018, allowing them time to assess the evidence before making a final decision.

Commenting, Royal London personal finance specialist Becky O’Connor said: “Credit scoring agencies are the gatekeepers to financial well-being. People rely on their credit scores for major life events such as buying a home, through to being approved for a car loan or even something as fundamental as a bank account. So ensuring competition and innovation in this market is about much more than profit margins, it’s about making sure people can still access the financial services that they have come to depend on, at the best possible rates.”

The statutory deadline for the CMA’s final report is 11 March 2019.

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