Knowing your customer | Part two
Handling personal information on customers is a delicate business, as a growing number of customers are increasingly becoming concerned about their personal privacy. To protect their interests, the law as it relates to customer profiling and credit checking is quite specific: only registered and authorised businesses and nominated members of staff can gain access to customer credit data and associated ratings. On top of this, all of the credit reference and related information services and their clients have to adhere to the provisions of the Consumer Credit Act, the Data Protection Act and a myriad number of other relevant laws designed to protect people's privacy and the use of their personal data.
Gillian Key-Vice, Experian's director of regulatory affairs, says that the issue of consumer privacy is very important when it comes to retail sales. She reiterated the fact that "It is a delicate area, but you might find members of staff being over-enthusiastic when it comes to checking their customers and quite frankly, people might be concerned that the member of staff is being too nosey. It is for this reason that the controls are tight and the penalties for abuse are severe’.
Critically, whilst other services, such as 192.com, are not a credit reference service like Equifax, and Callcredit, Key-Vice points out that they are still a supplier of personal data on individuals and so firms should still obtain the permission of a customer before they perform a check on them. She stated that ‘It is very important that they do this. It is not difficult, as we, like all companies in our domain, can provide the necessary words to add to customer trading agreements. The necessary words', she added, 'will need to provide customers with a clear notification of what the organisation performing the check will do with the data, and what it will be used for'.
Owing to consumer credit legislation, gaining access to consumer credit information is far from being a right, even for a paying business. For example Key-Vice explained that ‘credit brokers, such as motor traders have no right of access to shared credit information on customers in their own right. They must be working on behalf of a finance company which will normally only give them, the retailer, a yes/no answer to whether the customer's credit requirements can be met’. These limitations are there for the protection of everyone, says Key-Vice, as the data is shared only for agreed and specific purposes and every time a lender agency performs a credit application search, it leaves a footprint on the customer's credit file. For Key-Vice ‘Too many credit application searches in a given period is an indication that the customer may be applying for too much credit, and can adversely affect their credit rating’.
According to Key-Vice, the main reason that there have to be safeguards, is to ensure that the data is not being used for purposes for which it was not collected in the first place. She said ‘For example, the full electoral register data is only available for purposes associated with the giving or managing of credit or for checks for the prevention of money laundering’. Furthermore she added that ‘All three credit reference agencies can also provide the data to financial services companies to check job applicants and any organisation not entitled to see full credit data can still access public data for this purpose - with the person's consent of course’.
Should small businesses be concerned about staying on the right side of the law?
Key-Vice says ‘most definitely yes because no matter what business you are, there is still a chance of being caught out. You might find yourself brought into an investigation by a government agency into the activities of a company or consumer for any reason, and you could then be asked to account for your procedures’. The problem with small businesses and their approach to credit checking and allied services, says Key-Vice, is that many firms do things by rote. This may appear to be fine, she says, until things go wrong. By then, it's too late, and the penalties can be severe. The problem facing companies of all sizes, she says, is that it is often difficult to make the financial side of business attractive and interesting to the staff concerned.
For Key-Vice ‘The sad reality is that, until something goes seriously wrong, most companies and their staff tend not to be too bothered’. She went on to explain that ‘to help companies of all sizes, the Information Commissioner's Office, as well as the credit checking and allied industries, are all doing their bit in helping to educate firms about the regulatory issues’. The process, she says, is never-ending, as there are always large numbers of new people entering the employment chain, either from leaving full-time education or, increasingly, due to new arrivals into the UK from abroad.
Other resources
For more information, why not read the following guides;
Data protection law
e-Business and the law
Getting your business online
Small business accounts systems
Website privacy policy
By Steve Gold, News Editor
