Oran Hall The consumer and the credit bureau
With the advent of credit bureaux in Jamaica, borrowers have had to be more careful in how they borrow and how they service their debt.
Consumers, though, should note that while their credit practices cannot now be hidden and may affect them adversely, they do have rights, which they should be aware of.
A credit bureau is an independent agency that compiles and stores data on the borrowing and payment history of consumers to assess their credit worthiness, which is expressed as a numeric or alphabetic credit score, the higher the better, used primarily by potential lenders with the accompanying credit report in deciding to extend credit and on what terms.
The range of credit-information providers to the credit bureau is wide and includes commercial banks, merchant banks, building societies, credit unions, the Development Bank of Jamaica, insurance companies, the National Housing Trust, the Students Loan Bureau, businesses that sell goods under hire purchase, and people who publish information on suits and judgments for debt claims. It seems like there is no escape for people who borrow and fail to service their debt satisfactorily.
The Credit Reporting Act 2010 allows a credit bureau to collect the following types of information on consumers from prescribed credit-information providers:
o Information about the consumer’s financial means and credit worthiness in relation to transactions involving the borrower;
o The amount and nature of loans and advances or other credit facilities granted to a consumer;
o The type of security taken from any consumer in respect of credit facilities (including lease financing and hire purchase arrangements);
o The nature of any guarantee or other non-fund-based facility accessed by a consumer; and
o History of financial transactions, including antecedents and adverse court judgments, in relation to transactions involving the borrower and analysis of them such as any conclusions as to credit worthiness.
The credit bureau uses the information it gets on each consumer, or borrower, to generate a credit report on each person. It includes personal information – such as name, ID number, and date of birth – a credit summary, which includes credit accounts held by the consumer, whether they are current or past due, and a record of recent credit enquiries made about the borrower.
The credit bureau also creates a credit history of the consumer. It includes information on credit repayment records, court judgments, and bankruptcies. The bureau also generates a credit score for each borrower. Some lenders also use the information from the credit bureau to generate credit scores.
Credit scores give an indication of the likelihood of a borrower defaulting, so borrowers need to behave such that they can maintain a high credit score and thus be able to borrow, and at good rates, without difficulty.
Credit information is not only used to facilitate financial and other commercial transactions. It can be used to facilitate the underwriting of insurance for the consumer, for the purpose of employment and other purposes for which the consumer gives specific written instructions, and to comply with a Court Order in the course of investigations conducted under certain specific circumstances, pursuant to the Credit Reporting Act.
One right that the consumer has is to know, upon making a written request to the credit bureau, all information relating to him or her which is in the possession, custody or control of the credit bureau. The consumer is also entitled to know the source of the information and the name and address of every person to whom such information was given by or on behalf of the bureau in the six months immediately before the date of the request by the consumer.
Likewise, an institution that receives a credit report for a consumer from a credit bureau is legally bound to confirm it to the consumer if asked by the consumer and to provide the name and address of the credit bureau that provided the information.
A consumer who has a complaint about the accuracy or completeness of a credit report may make the complaint in person or in writing to the credit bureau and, if dissatisfied with the outcome, may submit a complaint in writing to the Bank of Jamaica, the supervising authority.
If credit information in a report has been amended, the credit bureau has to send a copy of the amended report to all recipients of the incomplete or inaccurate report, and must notify the consumer when the necessary changes have been made.
Accurate information from a credit bureau facilitates an accurate assessment of the credit worthiness of a consumer and puts the consumer in a position to qualify for credit facilities and at favourable rates. Borrowers should let the credit bureau be their friend.
– Oran A. Hall, author of Understanding Investments and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.