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Following my recent appointment to the Credit Information Governance Body (CIGB) Consumer Council, I’ve been reflecting on the direction of travel for creditworthiness and affordability assessments.
Although the CIGB is moving forward with actions to improve traditional credit information, lenders are no longer limited to backward‑looking credit files. They can now draw on live Open Banking feeds, detailed transaction histories, and large alternative datasets built from millions of credit applications. Yet despite this expansion of information, consumer harm linked to unaffordable credit has not disappeared. In some segments of the market, it has become more tightly engineered.
The problem is not a lack of data, but the way the regulatory framework allows different data sources to be combined, weighted and selectively emphasised within affordability assessments. What has emerged is a structural gap between technical affordability and real‑world financial resilience.
Affordability under CONC: necessary flexibility or exploitable ambiguity?
The core rules governing affordability sit within the FCA’s Consumer Credit Sourcebook (CONC). These rules deliberately distinguish between two related but distinct risks:
- Credit risk: whether the borrower is likely to repay.
- Affordability risk: whether repayment can be made without causing significant financial harm.
This distinction is essential and well‑founded. However, the way affordability is operationalised relies heavily on concepts that are intentionally principles‑based and undefined. In a data‑rich environment, that flexibility has become increasingly easy to exploit.
1. The absence of a defined living‑cost floor
CONC requires lenders to account for non‑discretionary expenditure and to leave borrowers with sufficient funds to maintain a “basic quality of life”. Crucially, it does not specify what that standard costs in practice.
Historically, lenders relied on broad statistical benchmarks— often drawn from ONS data or established industry models. Today, many lenders supplement or replace these benchmarks with alternative datasets aggregated from large volumes of application‑stage information.
These approaches do not necessarily produce inaccurate figures in a narrow technical sense. But they can generate compressed and over‑optimistic representations of living costs, particularly for households under financial pressure. This is because application‑stage data tends to reflect what households are currently managing under constraint — including rationing, deferral and reliance on credit — rather than the cost of a stable or reasonable standard of living.
The result is artificial headroom within affordability models — not because borrowers have misrepresented their circumstances, but because the system lacks a grounded reference point for what a reasonable living standard actually costs.
2. Sustainability reduced to short‑term cash flow
CONC also requires that repayments be made “sustainably”, from the borrower’s own income, without reliance on further borrowing.
Open Banking has transformed how this test is evidenced. Live transaction data allows lenders to identify, with precision, the amount of money remaining in an account at the end of each month. Where even a small surplus appears consistently, it can be used to justify repayments that consume almost all available headroom.
What this approach strips out is resilience.
A borrower may technically meet a repayment schedule while being left with an inadequate buffer to absorb even minor financial shocks. In this framing, affordability becomes a calculation of immediate feasibility rather than an assessment of whether credit supports a stable and dignified life.
3. “Reasonably foreseeable” changes
Finally, CONC requires lenders to consider whether there are reasonably foreseeable changes to a customer’s financial circumstances that could affect affordability.
While transactional data gives a very accurate view of the past and present it does not anticipate rising housing costs, volatile hours, benefit changes or wider economic pressures that are plainly foreseeable at a societal level.
Stable short‑term data can therefore be used to downplay or exclude foreseeable risks that sit outside the frame of individual datasets —again producing assessments that appear formally compliant but which are nevertheless substantively fragile.
Combining data without accountability
Taken together, these features create an environment in which lenders can lawfully construct affordability assessments that meet the letter of the rules while undermining their purpose.
In parts of the high‑cost, subprime and BNPL markets, business models have often depended on borrowers who are already financially stretched but highly motivated to repay. These consumers prioritise credit payments over essential spending because access to credit itself has become essential to survival.
From the lender’s perspective, these borrowers are profitable.
From the borrower’s perspective, they are absorbing ongoing harm.
The outcome is a formally compliant affordability assessment that masks the reality of financial precarity. This is not primarily a failure of individual rules. It is a failure of how the system scrutinises the interaction between datasets. Data is triangulated, weighted and traded off against itself — with little meaningful visibility into those decisions.
The limits of traditional regulatory fixes
Faced with these dynamics, there are familiar regulatory responses available to the FCA.
One option would be to anchor affordability more clearly to minimum living standards. For example by linking the concept of a “basic quality of life” to independent, evidence‑based frameworks such as the Joseph Rowntree Foundation’s Minimum Income Standard (MIS). Unlike aggregate ONS averages, MIS is grounded in detailed research on what households actually need to meet essential costs and participate in society.
Another orthodox response would be to require a compulsory resilience buffer, ensuring that precision data cannot be used to lend against every last pound of apparent surplus. This would avoid the types of cases that we often see in Financial Ombudsman decisions. For example, in case DRN 5972559 the sub-prime credit card lender, Vanquis Bank, provided a customer a £1,000 limit and then increased it by £500, even though reasonable repayments were around £50 per month and the customer's disposable income was only between £58 and £119 per month.
Minimum Income Standards and compulsory buffers could therefore help prevent lenders from taking the concept of affordability to such extremes. However, hard affordability rules of this kind could potentially restrict access to credit in 'edge cases', where it could improve the household's overall financial position — for example, some borrowers on low incomes could benefit from reasonably priced credit by using it to reduce ongoing living costs or to replace higher‑cost debt.
Most importantly, however, such rules would fail to resolve the deeper structural problem. Even with clearer rules, affordability assessments would remain largely opaque. Borrowers would still be required to expose intimate financial data, while lenders’ decision‑making logic — how different data sources are combined and prioritised — would remain hidden from view.
Unless this is addressed, the continued expansion of data sources and the increasing sophistication of analytical tools risks widening the scope for affordability assessments to be optimised and boundary‑pushed in ways that are difficult for regulators, let alone borrowers, to observe.
Complaints data: making lender behaviour visible
The FCA’s Consumer Duty was introduced to shift regulation away from procedural compliance and towards outcomes, governance and accountability. Firms are expected to identify foreseeable harm, monitor customer outcomes and act where those outcomes fall short.
In practice, this model places significant weight on firms' own assessments of outcomes, supported by internal data, management judgement and board oversight.
But this approach has limits.
In areas such as affordability, harm is often cumulative, normalised and bound up with wider income insecurity. Credit can be repaid on time while still undermining financial resilience, dignity and the ability to absorb shocks. These forms of harm are poorly captured by internal metrics designed to evidence “good outcomes”.
This is where complaints data plays a distinct role. Upheld complaints and Ombudsman decisions surface harms and reveal patterns of outcome failure that other monitoring may not detect. Yet many affordability complaints are resolved internally and never reach public or supervisory view, limiting their ability to inform system‑level learning.
Visibility, power and accountability
Borrowers are subject to extraordinary levels of scrutiny. Their incomes, spending patterns and histories are tracked, scored and sanctioned. By contrast, the logic that lenders use to justify affordability decisions remains largely protected as a commercial secret.
Under the current credit reporting system, lenders are insulated from the consequences of their own (mis)behaviours. Irresponsible lending is internalised by borrowers as adverse credit markers. The missed payments and defaults that eventually result are laundered through the credit reporting system to damage borrower reputations, reinforcing cycles of exclusion, higher prices and reduced choice.
If we are serious about rebalancing power in the credit relationship, this must change. Lender behaviour must become as visible as borrower behaviour.
At a minimum, upheld findings of irresponsible lending —whether through internal complaints or Ombudsman decisions — should be systematically recorded and made visible to regulators and relevant market actors, whether through credit reporting infrastructure or an equivalent supervisory ledger. If a lender is repeatedly found to have pushed the boundaries of affordability through selective use of alternative baselines or real‑time cash‑flow data, that track record should not remain hidden.
Transparency of outcomes is essential if data‑driven credit is to serve consumers rather than exploit them.
