The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

A Bahamian credit bureau will take 18-24 months to become operational once supporting legislation is enacted, the Deputy Prime Minister said yesterday.

During his contribution to the House debate on the Credit Reporting Bill and accompanying regulations, K P Turnquest said: "This is an important piece of legislation aimed at strengthening the stability of the financial sector and supporting credit growth.

"It will place the Bahamas' financial infrastructure in a much better position, and hopefully encourage a restart of bank lending that is so important for our economic growth objectives, during which time consumers will have an opportunity to make further adjustments to their borrowing profiles that would enable them to successfully access the credit markets.

"The Central Bank would commence an appropriate consumer education and information campaign about the operations of the proposed credit bureau, their rights and obligations."

The commercial banking industry and other formal lenders are likely to welcome the Government's move to enact the long-awaited Credit Bureau legislation, which has been several years in the making.

The House debate comes just one day after Tim Rider, Royal Bank of Canada's (RBC) Caribbean senior vice-president of sales, identified the absence of a Credit Bureau as one example of inadequate market infrastructure that had resulted in the bank's "diminshed appetite" to lend to middle and lower income mortgage borrowers.

"The current mortgage lending infrastructure has substantially diminished RBC's appetite for mortgages to the average Bahamian, and forced our focus up-market to those borrowers who are more affluent and have proven ability to repay their debt," Mr Rider told the RoyalFidelity Economic Outlook conference.

"The mortgage lending infrastructure, and lending infrastructure in general in this country, needs to improve so that we can actually open the lending books."

Mr Rider said the absence of a a Credit Bureau made it nearly impossible for Bahamas-based lenders to truly understand the level of indebtedness of a potential client. "This means decisions are based on significantly imperfect and much more narrow information than we are used to having in Canada, the US and Europe," Mr Rider said.

"While I know it is on the legislative docket, an expedited focus would be highly recommended."

The Bahamas' Credit Reporting Project was launched by the Central Bank in 2010, in a bid to establish a national credit reporting system in the Bahamas, including a Credit Bureau. The Bill and regulations were issued for public consultation in September 2014 and have been further revised since then, before finally being brought up for debate and passage in Parliament yesterday.

"We are advised that, based on the operating experience of existing Credit Bureaus, a sustainable credit reporting service provider needs in excess of 250,000 credit inquiries per annum, otherwise the capital cost of entry is too high and the subsequent cost of individual credit reports prohibitively expensive," Mr Turnquest said.

"Given this, the IFC has recommended a 'Hub & Spoke' operations model for Credit Bureau implementation in the Bahamas, where an existing provider would leverage its systems to service operations for several countries."

Mr Turnquest added: "In this model, the information held by the Credit Bureau on the consumers of each jurisdiction would be stored in the the Credit Bureau's database, but on a segregated basis with access provided to authorised persons only.

"Additionally, the Credit Bureau operator would be required to establish a physical presence in each country for the purpose of providing service to customers."

Mr Turnquest said confidentiality provisions in the Banks and Trust Companies Regulation Act 2000, and the Data Protection Act 2003, currently impede the sharing of a borrower's information with third parties. "To overcome this issue, the Clearing Banks Association was invited to draft a consent clause to permit credit providers to obtain the credit reports of their customers from the Credit Bureau, which may be used by lenders throughout the credit reporting sector to obtain consumer consent," said the Deputy Prime Minister.

He added: "The Credit Bureau will capture both positive and negative data, which studies have shown provides lenders the ability to predict borrowers' future payment behaviour. Consumers will have the right to dispute information held by the Credit Bureau that they perceive to be inaccurate, incomplete or out of date in a timely and low cost manner.

"The Data Protection Commissioner has the responsibility for enforcing the provisions of that Act with respect to protecting the personal data of individuals, and it is proposed that the Data Protection Commissioner's powers and responsibilities be extended to protecting consumers rights with respect to disputed credit reporting information."

The Bill also allows consumers the right to know that their information is being shared with the Credit Bureau, and know who has requested a copy of their credit report. They can also receive a free credit report annually upon request from the Credit Bureau.

The Bill also prohibits the Credit Bureau from disseminating data subject information to third parties without the subject's consent, and provides for the establishment of a Credit Reporting Review Commission to review any action taken by the Bureau as it relates to its clients or underlying data subjects.