IER, a double-edged sword for financial services

Individual electoral registration (IER), due to be introduced in 2015, is a double-edged sword for financial services companies. While it will help cut down on fraud and lead to a more accurate, complete register, millions of people could disappear from it altogether. This will not only have an impact on direct marketing, but will make it almost impossible to carry out credit checks and identity verification of those not on the register.

A 2011 Electoral Commission report found that at least six million people were not on the register. The introduction of IER could lead to drop-off rates as high as 30% in some inner city areas, according to some estimates.

What will change with IER?
Under IER, it will be the individual’s responsibility to complete the electoral registrationform. Each voter will be required to provide their date of birth or National Insurance number. If the person can’t be verified from this information, they will have to provide a driving licence or passport.

IER is a much more robust process than the current household canvass, so it will create a more complete and accurate register. However, consumer apathy in the UK is such that some people will not bother to fill in the forms individually or not be inclined to provide ID. Some may not even have the necessary ID to prove who they are. The Government is looking at ways to transfer people across to new register but haven’t confirmed how this will work or how they will verify these individuals.

Edited electoral register could see more opt-outs
Since 2002, there have been two electoral registers, a full version, and an edited one, which marketers can access. The edited electoral register is already shrinking because of growing opt-out rates – it’s around 40% at present.

“If the full electoral register were to deplete by a further 30% then that’s going to have a big impact on financial services simply because of the uses of the register and the edited register that’s derived from it,” warns Jan Smith, director of industry relations at CallCredit.

From a credit referencing point of view, the full version is used for credit application checking and for anti-money laundering. Financial services companies use the edited version for verifying addresses, delivering services and products, account management and debt recovery.

Consumers confused about electoral register’s uses
The Bill is making its way through parliament, and has seen a number of amendments. This includes a new clause in the IER registration proposals that will give people the option to opt out of the edited register indefinitely. This has huge implications for all businesses not just financial services ones.

Many people are still confused about the uses of the edited version and aren’t aware of what they’re opting out of. Another proposal will require local councils to provide additional information for consumers at the point of registration on what each register is used for. It could explain that the full register is used primarily for voting but is also used for credit application checks and money laundering checks.

It could also list what the edited register is used for (ID verification, employment checking, verification for providing goods and services to properties, rental agreements). The person will then know that if they’re going to be active in any of those credit markets and are not on the register it could cause problems.

While financial services firms agree with the principle of individual registration, as it will give a more complete and accurate register, consumers need to be fully aware of the implications of not registering. Otherwise, businesses could potentially lose access to certain groups of consumers. The groups most vulnerable to disappear from the electoral register under IER are the under 25s, ethnic minorities and students.

The Bill is going through the House of Lords committee stage in October so there may be further consultation.

Caroline Roberts, DMA director of public affairs