LETTER OF THE DAY - Sceptical about credit bureau
As I give thought to the establishment of a credit bureau in Jamaica, I don't know that I am as enthused about it as the promoters are. Here are some challenges that I sense in this system:
Is it that minimum interest rates are to be decided by one's credit rating, or by market forces which would clearly pre-exist the establishment of a credit bureau? My suspicion is that usual market forces will continue to determine minimum rates and rates will increase relative to one's credit rating. This will not make business easier. It will only, hopefully, exploit people with poor credit rating.
Conservative lending agencies
What the above situation will do is open up a window for the United States subprime debacle to occur here. If the principle that capital seeks out the highest return stands true, then it will become more attractive for lenders to seek out persons with poorer credit ratings. To give balance, however, I suppose there will be those conservative lending agencies which will use information emanating from the bureau to refuse extending loans to certain legal persons.
What redress will be available to persons who have been unjustly reported to be in default? Will there be an arm of this bureau which will deal with such cases? Who will be able to report on a debtor? Under what conditions will reports be accepted?
Honour your obligations
While I'm not suggesting that we shouldn't go this route, the clear winner in this move will be the creditors. The caution to debtors, and would-be debtors is that you should count the cost before you mount the horse, honour your obligations, and if you have challenges, don't hide. Contact your creditor immediately. Inasmuch as there may be some sort of standardisation of credit ratings and corresponding interest rates, much is left to the discretion of credit agencies. The debtors' best bet is to build great relationships with creditors, and ... pay your debt.
I am, etc.,