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2 Aug 2018

Competition watchdog to probe Experian and ClearScore merger

The deal could mean we pay more for credit cards and loans

The UK's competition watchdog has referred Experian's proposed takeover of ClearScore for an independent investigation after the world's biggest credit data firm failed to address concerns about users losing out from the deal.

The Competition and Markets Authority (CMA) had given Experian a week to respond to a number of issues over the planned merger, which will unite the UK's top-two providers of free credit-checking services.

Here, we explain why it matters and how you might lose out from the deal, plus the other big changes to credit-monitoring services you should know about.

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Who are Experian and ClearScore?

Experian is one of the three major credit reference agencies in the UK collecting data about how we manage our finances, alongside Equifax and TransUnion (formerly Callcredit).

It also offers a free credit report checking service which allows people to see what sort of data the firm holds on them, their Experian credit score and which loans and credit cards they may be eligible for based on the information.

ClearScore, which has over six million users in the UK, is a financial technology company that provides a free credit report checking service powered by data it receives from Equifax. It also introduces people to credit cards and loans that might suit them.

Why does it matter if Experian buys ClearScore?

Experian said in March that it would buy ClearScore for £275m. But as both firms offer a free credit report and score service which help people better understand how lenders see them, they are classed as being direct rivals.

The CMA is worried that as two of the largest credit-checking firms and each other's main competitor, a merged company would be less likely to innovate to help people understand their finances better - potentially leading to people paying more for credit cards and loans.

In a statement, the CMA said: 'Experian has chosen not to offer proposals to address the CMA's concerns and so the merger will now be referred for an in-depth investigation by an independent group of CMA panel members.'

An Experian spokesperson said: 'We have noted the comments from the CMA and are reviewing them in detail. We believe the proposed acquisition is a good move for innovation, competition and consumer choice in the UK.

'As such, we will continue to work constructively with the CMA to make the case as to why the transaction should be approved.'

We asked ClearScore for a comment but it said it was unable to provide one while the merger was under investigation.

Other credit-monitoring changes you should know about

Experian's proposed takeover of ClearScore isn't the only big change to hit credit-monitoring services.

Earlier this year American firm TransUnion, a global risk and information solutions provider, acquired Callcredit - the second-largest credit reference agency in the UK - for £1bn.

The CMA told Which? there are no cases relating to this deal, but says it has the power to look at mergers even after they've gone through.

The recent moves from TransUnion and Experian are likely to be to do with how 'open banking' is unlocking current account data in the UK.

Opening banking gives people the right to share their current account information with trusted third parties, so if we give them permission, credit reference agencies and financial technology companies will be able to delve deeper into our finances.

Currently, credit reference agencies can access certain bits of information about us like whether we're on the electoral roll, how many current accounts we have and how good we've been at paying back loans.

With open banking (and our explicit permission), these credit-monitoring firms will be able to see the amount of money held in our accounts and what we spend it on, which is not currently tracked.

ClearScore has recently announced plans to launch a new service called OneScore, which will use current account data to give users a more accurate understanding of their financial wellbeing. The service is set to provide real-time updates of a user's financial position, with current account information provided through Open Banking.

What's next for Experian and ClearScore?

The CMA has referred the case to an independent panel for further investigation.

If the investigation finds the merger between Experian and ClearScore is detrimental to competition in the market, it has the power to impose changes. These might include a ruling to sell off parts of the merged company's business or, ultimately, the deal could be blocked from happening altogether.

Stakeholders, including interested firms, regulators and members of the public, will be able to submit comments or evidence for consideration when the CMA publishes its provisional findings later this year.

The CMA will publish its final decision on 14 January 2019.