November 14, 2006
The fact that another international credit bureau is entering the
Canadian market should make life easier for consumers.
Stealthy credit facilitators
By Peter Diekmeyer • Bankrate.com
By all appearances most Canadians greeted with a big yawn the announcement
that Experian, a global provider of consumer credit information to
businesses, has decided to expand operations here. News editors played
down the story and those who did report it, gave it low priority.
However although credit bureaus often operate below the radar, they play a
huge role in facilitating the financial dealings of millions of Canadians.
So it’s worth paying attention when a new player enters the fray, as
Experian did several weeks ago, when it acquired the Canadian operations
of Northern Credit Bureau.
Like its primary competitors Equifax and TransUnion, Experian helps
lenders make more informed and reliable credit decisions, by providing
them with information about the personal finances about the millions of
consumers whose profiles are maintained in the company’s databases. The
relatively open market for this type of information is a big reason that
consumers can get pre-qualified for credit products ranging from an online
loan to an on-the-spot car lease, seemingly without much verification
Big opportunities from expanded borrowing
According to one of its key executives, Experian sees significant
opportunities in the Canadian market. “Consumer borrowing levels have
increased substantially in recent years,” said Hiq Lee, the company’s
executive vice-president (credit information systems). “With total
consumer debt now exceeding total personal disposable income, financial
institutions, credit grantors and retailers need better alternatives for
data and tools to manage their businesses.”
Experian already had a foothold here in Canada through its Experian-Scorex
subsidiary, which provides scoring and software tools to Canadian lenders.
However the Northern Credit Bureau acquisition, which brings to 13 the
number of countries in which Experian operates a consumer credit bureau,
gives it a solid base from which to build its domestic credit reporting
Not surprisingly, the increased globalization of consumer and financial
markets is a big reason for the London Stock Exchange listed company’s
move into Canada. “Our international customers were asking us to provide
them with services throughout a number of countries and Canada appeared to
be a good fit,” said Tony Canapini, Experian Canada’s country manager.
Like all of Canada’s major credit bureaus, Experian, which collects credit
information about consumers from businesses and then resells it to clients
ranging from retailers to financial services organizations, generally
operates below the radar of most consumers. However according Canapini,
the company’s move into Canada will be a net plus for local consumers.
“Although consumer borrowing levels have gone up here in Canada, debt
isn’t necessarily a bad thing unless it is managed poorly. However smart
borrowing can give consumers access to product which they would otherwise
have to wait a long time for,” said Canapini.
Does Canada really need another credit bureau?
However according to one consumer affairs activist, it remains unclear
what advantages the entry of a new player into the Canadian market will
bring. “Do we really need another credit bureau here?” asked Jannick
Deforges, a lawyer with Quebec-based Option Consommateurs. “Credit usage
is already fairly widespread. In fact many consumers have borrowed too
much. Is it really a good thing to make it easier for people to borrow
Nor is Desforges impressed with the credit bureaus’ claims that they are
striving for better accuracy. “Numerous studies ranging from those by
Consumer Reports in the United States to Proteger-Vous here in Quebec,
show that errors are widespread in the information collected by credit
“We are already telling consumers, particularly those who are having
trouble with their credit planning, that they are entitled to a free copy
of their credit report and they should request a copy from all of the
bureaus each year,” said Desforges. “However if there is another player in
the Canadian market, consumers will have to keep track of three credit
reports instead of just two.”
In a sense, this would benefit the credit bureaus just fine. Both Equifax
and Trans Union sell services that enable consumers to monitor changes in
their own credit profiles, in exchange for a small monthly fee. Experian
offers a similar product to its U.S. customers and is thinking about
making the services available to Canadians too. The more credit bureaus
that Canadians who want to track their credit records have to worry about,
the easier it will be for them to sell those credit monitoring services.
The bottom line is that although Canadians as group tend not to focus too
much on the operations of credit bureaus, there is a lot going on below
the surface. Credit bureaus clearly bring a lot to the table in terms of
speeding the granting of loans, which in turn speeds economic growth. Yet
for many consumers, especially the increasing numbers of those who are
loading up on debt, it remains unclear whether the benefits exceed the
costs. As a result, at a bare minimum, keeping abreast of industry
developments is more than worthwhile.
Peter Diekmeyer (www.peterdiekmeyer.com) is a freelance business and