Lenders gear up for CCR Launch
Another milestone on the road to the proposed Central Credit Register was reached last month with the publication of the responses to the Central Bank Consultation Paper CP 93.
Some 20 parties, including 9 Credit information Providers (CIPs) and 6 CIP representatives bodies made responses. (In the world of the CCR, a CIP corresponds to a lender and CIS(Credit Information Subject) is a borrower.)
Nobody can argue with the objectives of the CCP, which include:
- To create a comprehensive credit register though mandatory reporting requirements;
- To provide an accurate Single Borrower View of loans;
- To provide consistent and comprehensive reporting of credit agreements;
- To provide controlled access to CIPs at key points throughout the credit lifecycle, and to CISs upon request;
- To ensure that data is collected, stored and used properly and securely;
- To facilitate the Central Bank in the performance of its functions through access to credit information;
- To support consumer protection; and
- To support broader economic development.
All the same, it should not be forgotten that the Credit Reporting Act of 2013, on which the formation of the CCR is based, is a direct mandate of the EU/ECB/OECD troika and a necessary part of the credit infrastructure to save us from repeating our worst excesses. But, as we have reported previously in these pages, there remain serious issues around the attitude to credit and our ability to monitor creditworthiness.
The Irish Credit Bureau (ICB) we know to be barely fit for purpose. For years it operates as a closed shop for banks to share information with each other but excluding the participation of all the other credit providers – the credit unions, the utility companies, telephone companies.
One of the ICB’s major shortcomings was lack of completeness of its data – for example, it has no access to judgments, probably the single most predictive element of any person’s credit profile. Likewise, the ICB has no visibility on business debt. In a country where perhaps 30% plus of individuals are also company directors or business owners whose financial affairs are intrinsically linked with their private affairs, this renders many credit assessments on that basis decidedly suspect.
Hence, for many years we here at StubbsGazette have advocated a multi-bureau approach, similar to the US and UK, the better to get a full picture of an individual’s (or business) financial profile and general creditworthiness. In those countries, when there is a credit application it is referred to three or four different credit bureaus each of which have their own personality and strengths. Creditors typically also have their own score cards built so they’re able to get a much more holistic view of their customers’ financial position, using the credit bureaus’ scores and blending it with their own credit score to get a better picture.
Instead of this approach, the Central Bank has elected to keep the CCR in the hands of the State, albeit operated by company called CRIF, which we believe stymies innovation. In fact, most of the major credit bureaus – Experian, Equifax, D&B, CallCredit – initially expressed interest in the CCR but all pulled out, presumably because there was no incentive for them to invest their resources and IP in developing the system.
Ireland Is still handicapped by the inexplicable decision of the Irish Court Services to stop publication of unregistered judgments. For years StubbsGazette’s network of correspondents collected those judgments, travelling to some 70 courts throughout the country, manually transcribing that information and then processing it for inclusion in our credit bureau. Under data protection regulation we were obliged to send a data processing notice to give the debtor 30 days to respond and if they hadn’t responded after 30 days we would have posted that information on the credit bureau that would have affected that person’s score.
We’ve seen many cases where individuals and companies have had more than 50 unregistered judgments – if that is not indicative of a certain mode of behaviour then nothing is. It would be interesting to note the attitude of the troika if this were made known to them.
But let’s not be negative – the credit decision will certainly be made easier with the arrival of the CCR. At that point it will be mandatory for lenders to submit information on credit agreements and payment histories to the CCR and check credit information on the CCR when considering credit applications for €2,000 or more.
When exactly can we expect to see the CCR in place is a matter of conjecture? Based on the feedback received to CP 93 the Central Bank is proposing that Data submission into the CCR will occur in two phases.
Phases 1 will cover all lending by CIPs to consumers. Phase 2 will cover all other lending by CIPS (non-consumers).
The Central Bank is proposing that CIPs will provide data in respect of Phase 1 from 30 September 2016. CIPs may commence reporting this data in the 6 month period from 30 September to 31 March 2017; any CIP that commences reporting for the first time after 30 September 2016 in respect of Phase 1 will be required to backdate data to 30 September 2016.
For Phase 2 reporting of data will commence from 30 June 2017. CIPs may report this data in the 6 month period from 30 June 2017 to 31 December 2017; any CIP that commences reporting for the first time after 30 June 2017 in respect of Phase 2 will be required to backdate data to 30 June 2017.
Unfortunately, these timelines seem highly aspirational if the feedback of Bank of Ireland is any indication. In its submission the bank states; “The absence of data definitions and specifications is a major limiting factor in making any definitive comment on proposals at this stage. The first step towards the establishing of consistent, reliable data in the CCR needs to be the setting of definitions and standards for the collection, calculation and provision of that data. It may take some time to arrive at common, achievable definitions and standards across hundreds of data suppliers so we would urge that this exercise is addressed with urgency… It is likely to be some years before there is sufficient data in the CCR to support credit decisions with the same degree of statistical power as the current services in place for consumer lending