ClearScore has secured GBP 3.4 million funding from Fair4All Finance to develop a debt consolidation loan technology for people in financially vulnerable circumstances in the UK. As per the official press release, the proposition from ClearScore, named ‘Clearer’, allows direct settlement of consumer debts, thereby eliminating the risk that the funds are not used to pay off existing credit cards and loans.

It is expected that rolling out this debt consolidation proposition at scale will expand access to loans, reduce interest rates paid by borrowers and reduce risk for lenders. Ultimately, this is intended to help many borrowers, including people in financially vulnerable circumstances. The press release also mentions that the funding associated with Fair4All Finance’s consolidation lending pilot will be partially allocated to development costs.

These funds will help create an automated and scalable debt consolidation solution, which will be available on the ClearScore marketplace, white-labelled for third-party online marketplaces, and for lenders to integrate into their direct channels. Fair4All Finance will recover this investment through a revenue-sharing agreement with ClearScore. Lenders including Abound, Hastings, Loans by Mal, Oakbrook Finance and Plend are the first ClearScore partners to have committed to using the technology in the ClearScore marketplace once fully developed.

Reshaping debt settlement ClearScore originally developed the Clearer direct settlement technology in 2023 and worked with personal loans provider Abound on a pilot project to build out the proposition. The pilot showed that direct settlement of consumer debts helps consumers that are currently financially excluded to access debt consolidation loans and helps consumers get better interest rates, as well as preventing them from falling further into debt. The collaboration between ClearScore and Abound yielded an annualised default rate of under 2%, compared to an expected 22% if based purely on credit scores.

It showed that lenders could issue more loans by improving affordability and could offer better interest rates across debt consolidation loans. Overall loss rates can be lowered plus direct settlement of debt helps lenders comply with Consumer Duty regulations. Furthermore, a portion of the Fair4All Finance funding aims to lower the cost of lending to financially excluded individuals by subsidising loan fees for certain lenders.

This initiative is projected to facilitate an additional GBP 500 million in lending through approximately 45,000 debt consolidation loans. ClearScore’s solution is aimed to be robust and scalable, using the latest cloud-based technologies. ClearScore makes it simple for lenders to integrate with its platform via a single API, enabling lenders to offer Clearer within a matter of weeks.

Clearer encrypts data at the point of collection with a highly automated solution, using bureau data to surface existing debts, which minimises user input and error. .