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Credit bureaus call for mandatory info sharing, law up for review

Published:Wednesday | April 24, 2019 | 12:15 AMAvia Collinder/Business Reporter
Craig Stephen, CEO of CreditInfo Jamaica Limited.
Craig Stephen, CEO of CreditInfo Jamaica Limited.

Adjustments to the law that polices credit bureaus are under consideration, a development that two of the three players say should open up the market to new products and services that they are currently barred from selling.

Craig Stephen, CEO of CreditInfo Jamaica, says a consultant was sought by the Bank of Jamaica (BOJ) to assist in preparing recommendations for amendments to the Credit Reporting Act, a near decade-old law passed in 2010.

The central bank confirmed the law was up for review, saying recommendations would be made to the Ministry of Finance in due course.

No other details were forthcoming.

“The process is not at that stage and we cannot comment on the legislative changes that may eventually be contemplated as a result,” the BOJ said via email.

Stephen says he is hoping the changes will include adjustments on information sharing, in line with how foreign credit bureaus operate, and for the current process for obtaining consent for a credit report to be adjusted and codified.

“Bureaus in the developed markets don’t battle on which entity has which data set but on product, price and service,” he said.

Terrence Cooper, CEO of CRIF Information Bureau, adds that the pool from which credit information can be sourced should be widened beyond the lending community to include entities such as third-party collection agencies, landlords and property managers, among others.

“This would aid financial institutions greatly in the collection of outstanding debts, as well as provide a fair and accurate way of reflecting the repayment of such bad debts,” said Cooper. It would also assist consumers rebuild their credit scores, he said.

The BOJ has only licensed three credit bureaus since the advent of the service – namely Creditinfo Jamaica, CRIF, and Credit Information Services Limited.

The BOJ says it has placed no limits on the number of players in the market, but Stephen appears to be arguing there is no more room for rivals.

“The United States has 300-plus million people and has three major credit bureaus – Equifax, Experian and Trans Union. Jamaica has three million people and we already have as many credit bureaus,” he said. “There has to be a healthy balance between the number of bureaus and the size of the market being supported.”

CreditInfo Jamaica began offering services in 2011, but over the years, said Stephen, the utilisation of the credit bureau services overall is still not as widespread as the industry would have liked.

“The market has tiptoed into using credit bureaus as it requires a fundamental shift in the way most have done business for a number of years, and breaking that trend has proved more challenging,” he said.

As for the operations of the bureaus themselves, he added, parts of the law are impractical to apply.

“For example,” he said, “the issue of consumer consent as it is contemplated in law now says that the credit bureau must receive a physical consent form before providing credit reports, but this does not work with the practical and real-time information exchange required for an efficient credit bureau operation. Some guidelines were issued by the BOJ allowing for us to operate but those guidelines now need to be incorporated in an amended Credit Reporting Act,” he said.

Stephen is hoping the Jamaican market will eventually come to recognise credit bureaus not only as “credit reporting agencies” but as “complete risk management solutions for which the credit report forms our core business”.

That would require provision of services such as analytics, decision and information solutions, scorecard modelling and development and risk consultancy, as done by bureaus internationally, he added.

“So we don’t just give our clients a credit report and let them be on their way, we assist them with software to automate their lending and credit-risk management processes, and consultancy to help them maximise their use of our tools. The take up on value-added services here requires improvement, but we do see where the demand for such products and services are increasing every year.”

The biggest impediment to that goal, he added, is the non-mandatory nature of the current legislation, which does not force institutions to share information.

The option of choice, he says, allows for information asymmetry – “the very thing the credit bureau [market] was designed to reduce”.