Brendan Burgess
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Five-minute money: Central credit register
By Niall Brady Sunday Times 10 June (Reproduced with permission)
Lenders will be forced to share personal information about their customers under a sweeping overhaul of credit rules being planned by the government.
The reform is being demanded by Ireland’s bailout troika, which believes that shoddy lending practices were responsible for the banking crisis. We look at how the planned central credit register will operate
ISN’T INFORMATION SHARED ALREADY?
Banks and finance houses have shared information about customers for many years through the Irish Credit Bureau (ICB), which they own.
Data protection laws require lenders to get borrowers’ permission before reporting details of their loans to the ICB. While borrowers can refuse permission, this could damage their chances of getting a loan
HOW WILL THIS CHANGE?
The principle of consent would disappear under the government’s plans for a central credit register. Lenders would have to report all loans greater than €500 to the register, even if borrowers withhold consent.
Loan application forms would include a warning that the lender is required by law to share details of the loan with the credit register.
Lenders would also be required to consult the register to check on the creditworthiness of anybody looking to borrow more than €2,000.
Borrowers would also be obliged to tell lenders about any foreign debts they have greater than ¤5,000 when applying for a new loan.
The government claims that tighter scrutiny of credit is in consumers’ interests because it would weed out those seeking to borrow more than they could afford.
Creditworthy borrowers would benefit too, the government says, because better lending standards would reduce bad debts, which should lead to lower interest rates
WHAT’S WRONG WITH THE CURRENT SYSTEM?
Well Some lenders, especially credit unions, are not members of the ICB, so its records cannot always provide a comprehensive picture of borrowers’ total indebtedness. There are also gaps in the ICB’s records, including the extent to which borrowers have given personal guarantees as security for their debts To address concerns that borrowers’ personal data might be abused, the government proposes that the central credit register should be owned by the Central Bank. It will be allowed to outsource the operation to third parties such as the ICB
WHAT WILL BE ON THE DATABASE?
Your file at the central credit register would have your name, mother’s maiden name, date and place of birth, address and mobile phone number. It would track the payment history on current loans for the previous two years. The register would also keep a record for up to five years of old debts that have been paid off. Unlike the ICB, the register would note all loan applications you have made in the previous six months, even if you do not draw down the loan
WILL THE DATABASE BE PUBLIC?
Borrowers will be able to consult their credit file once a year free of charge. The existing ICB gives similar access, although it charges ¤6 each time you view your file. If you find errors, you would be able to ask the credit register to block your file so that the disputed information is not shared with others until the dispute is resolved. The register would be able to compel lenders to investigate the errors and correct them, if necessary
TOP TIP
You can send your feedback to the government’s proposals to creditreporting@finance.gov.ie before June 29.
Public Consultation Document
By Niall Brady Sunday Times 10 June (Reproduced with permission)
Lenders will be forced to share personal information about their customers under a sweeping overhaul of credit rules being planned by the government.
The reform is being demanded by Ireland’s bailout troika, which believes that shoddy lending practices were responsible for the banking crisis. We look at how the planned central credit register will operate
ISN’T INFORMATION SHARED ALREADY?
Banks and finance houses have shared information about customers for many years through the Irish Credit Bureau (ICB), which they own.
Data protection laws require lenders to get borrowers’ permission before reporting details of their loans to the ICB. While borrowers can refuse permission, this could damage their chances of getting a loan
HOW WILL THIS CHANGE?
The principle of consent would disappear under the government’s plans for a central credit register. Lenders would have to report all loans greater than €500 to the register, even if borrowers withhold consent.
Loan application forms would include a warning that the lender is required by law to share details of the loan with the credit register.
Lenders would also be required to consult the register to check on the creditworthiness of anybody looking to borrow more than €2,000.
Borrowers would also be obliged to tell lenders about any foreign debts they have greater than ¤5,000 when applying for a new loan.
The government claims that tighter scrutiny of credit is in consumers’ interests because it would weed out those seeking to borrow more than they could afford.
Creditworthy borrowers would benefit too, the government says, because better lending standards would reduce bad debts, which should lead to lower interest rates
WHAT’S WRONG WITH THE CURRENT SYSTEM?
Well Some lenders, especially credit unions, are not members of the ICB, so its records cannot always provide a comprehensive picture of borrowers’ total indebtedness. There are also gaps in the ICB’s records, including the extent to which borrowers have given personal guarantees as security for their debts To address concerns that borrowers’ personal data might be abused, the government proposes that the central credit register should be owned by the Central Bank. It will be allowed to outsource the operation to third parties such as the ICB
WHAT WILL BE ON THE DATABASE?
Your file at the central credit register would have your name, mother’s maiden name, date and place of birth, address and mobile phone number. It would track the payment history on current loans for the previous two years. The register would also keep a record for up to five years of old debts that have been paid off. Unlike the ICB, the register would note all loan applications you have made in the previous six months, even if you do not draw down the loan
WILL THE DATABASE BE PUBLIC?
Borrowers will be able to consult their credit file once a year free of charge. The existing ICB gives similar access, although it charges ¤6 each time you view your file. If you find errors, you would be able to ask the credit register to block your file so that the disputed information is not shared with others until the dispute is resolved. The register would be able to compel lenders to investigate the errors and correct them, if necessary
TOP TIP
You can send your feedback to the government’s proposals to creditreporting@finance.gov.ie before June 29.
Public Consultation Document