When George Orwell coined the phrase “Big Brother is watching you”, he could not have foreseen the extent to which his words apply to our daily lives in the 21st century.
The latest step on the path towards total and absolute surveillance of all that we do came on Monday, when credit referencing agency Experian launched ‘Risk Triggers’. According to the Experian website, this ‘daily monitoring service’ allows banks, credit card companies and lenders to find out “derogatory information such as bankruptcies, judgments, liens and late payments” within 24 hours of it being noted on your “file”.
In other words, even if you miss just one payment, all the other financial institutions you are involved with, from your credit card provider to your mortgage lender, can receive an alert informing them of your ‘misdemeanour’. And there’s no way you can stop them or opt out – when you sign up to get credit in the first place, you have to give lenders the right to check up on you in this way at any time.
And what will the banks do with this information they are sharing about you behind your back? The website states that Risk Triggers enables “credit-grantors” to “manage potential delinquencies in the earliest stages”.
What does that actually mean for you and me?
Down the slippery slope
Imagine this scenario. You go away on holiday, move house, the post goes missing – or perhaps you simply forget. But for whatever reason, you fail to pay one of your credit card bills for one or two months.
The next thing you know, you receive a letter from one of your credit card providers, informing you that the credit limit on your card has been cut, instantly, and you are no longer allowed to spend as much as you had once been able to.
There’s no explanation.
The next day, you receive a letter from your bank. Your overdraft limit has been reduced.
Again, there’s no explanation.
It’s terrible timing. You are committed to make a large purchase that month, and suddenly your finances are in disarray. So again, you miss a credit card payment and perhaps you are, for the first time ever, late with your mortgage payment.
Instantly, another letter arrives in the post, this time from the mortgage lender. It warns you that failure to meet your mortgage payments could lead to your home being repossessed, and implies you are in serious financial trouble.
It is one of the scariest letters you have ever opened.
A nightmare come true
Are the hairs on your neck starting to stand up? If not, they should be – because this nightmarish situation may soon become a reality if a lot of “credit-grantors” sign up to Risk Triggers (as they have in the US). And there certainly seems to be an appetite for such a service among UK credit card providers: The Telegraph recently reported many borrowers have already had their credit limits slashed this year.
But while I think it is appalling that banks can share information about you without your knowledge or explicit permission, and there is no way of stopping them (except, of course, by living a credit-free existence), I wonder whether – for some people, at least – the new Experian service may actually prove to be a blessing in disguise?
The Fool recently reported that more than a million households in Britain are using their credit cards to pay their mortgage. Shifting debt around in this way often only delays the inevitable – repossession –while racking up thousands of pounds in extra interest charges on the credit card.
Experian argues that reducing the amount of credit available to people who are in real financial trouble (and therefore basically living on borrowed time as well as borrowed money) could force them to seek help and address their debt problems sooner rather than later. This could potentially save them a lot of money, and may even prevent them from going bankrupt.
To some extent, I can see the point of this argument. And if I could be certain that banks were only going to take action when a real problem emerges (for example, if someone misses several payments in a row or on several different cards at once), then I would be able to rest easier in my bed. But it worries me that banks could, in theory, decide to take action after you miss just one payment on just one card – without bothering to find out why this happened.
Banks are frequently accused of giving you an umbrella when the sun is shining, but taking it away when it starts to rain.
This is a case in point. As long as you meet all your payments on time, you can take out all the loans and credit cards you want and lenders will queue up to extend your credit limits and encourage you to borrow more. But the moment you start to struggle, this new service means banks may drop you like a hot potato – shouting ‘run away, run away’ to each other at the tops of their voices – and then turn around and claim they have acted responsibly.
At the end of the day, the whole thing just smacks to me of Big Brother — or perhaps more accurately, Supernanny — watching what you are doing through some sort of sneaky surveillance system and then, if you are seen to misbehave, putting you on the naughty step and whacking your finances with a wallchart.
I’m just grateful Orwell’s not around to see it.
This article was written by By Donna Werbner | 21 November 2007 in The Motley Fool