We have been following the journey of Lord Bird’s Creditworthiness Assessment Bill through the parliamentary process and I was very thrilled to see it progress through the committee stage at the end of last week, with widespread support and no amendments.
This is an inspired piece of legislation which, if passed, will level the mortgage playing field for the UK’s 11 million renters.
A Broken System
At the moment rental payments aren’t recorded or recognised in the same way as mortgage payments are, so even the most reliable tenant, who has been paying their rent on time for years, will not see that reliability reflected in their credit file. Ultimately that means that some of the country’s least well-off people end up paying the most to borrow, including repayment contracts, white goods and mobile phones.
The bill was first presented by social entrepreneur, homelessness campaigner and founder of The Big Issue, Lord Bird, back in the summer of 2017. He was reported then as saying: “Generation rent has been hit hard and they deserve fair access to credit. We want to empower more people to get on in life.”
A Shared Vision
Castlight Financial shares John Bird’s vision for re-calibrating the credit market, opening up fairer access to more affordable credit to more people, particularly people who are renting their homes. The Bill aims to impose a requirement of the FCA to make rules to ensure that firms carrying on credit related activities take into account rental payment history and council tax payment history when assessing a borrower’s creditworthiness.
Of course, the borrower will have to be able to demonstrate that they have indeed got a solid history of reliable rent and council tax payments.
How Will They Do This?
They can do it very easily with Castlight Financial’s Affordability Passport.
The Affordability Passport can, within minutes, categorise in real time all the transactional spending of an individual’s account. At the press of a button, one of the reports it can pull is a full history of rental and council tax payments.
Castlight Financial’s Affordability Passport is already live in the mortgage space. And now with Lord Bird’s legislation moving swiftly through the parliamentary process, it seems that financial inclusion and social justice is just around the corner for the UK’s 11 million renters.
Lets Talk About Affordability
As I’ve said before, debt sucks people into poverty so fast. Lord Bird is championing a Bill but he’s also starting a conversation. We need to continue to talk about ways to help create a safer, financial world. Enfranchising renters is one way.
But we also need to keep talking about affordability – how to help people avoid taking on more debt than they can afford. And we need to be using fintech solutions like our Affordability Passport to help people out of debt once they’re in it and change financial behaviours. But more of that later. Watch this space.