40,000 credit cards on "debt" list
By Iromi Perera
Sri Lanka has close to half a million credit card holders but many are unaware that if they default on payment, their names are filed as a "debtor" with the Credit Information Bureau (CRIB) - restricting chances of getting a bank loan.

While CRIB says this process has been in force since 1998, some anxious cardholders called The Sunday Times FT last week saying they believed their fundamental rights would be violated by personal information being passed to another authority. At least two respondents in a survey conducted later by the paper said it was an invasion of their privacy.

CRIB began collecting data on credit card defaulters in 1998 and banks admitted they were aware that this information was a compulsory requirement. CRIB said it is compulsory for banks to provide information of credit card holders who have defaulted in payments. Credit card holders, who do not make the minimum payment for bills over Rs 5,000 for 90 days consecutively, will be entered in the CRIB 'negative' list.

It was clear from The Sunday Times FT survey that most of the banks dealing with credit cards haven't adequately informed their clients about the CRIB rule.

According to N.P.H. Amarasena, General Manager of CRIB, there are currently around 40,000 credit card defaulters in the CRIB database. The number of defaulters has been increasing since 1998. Once a defaulter settles their debt, they will be removed off the 'negative' list but their details will include the fact that they have defaulted at some point and were irregular in payment. Amarasena firmly stated that the CRIB list was not a 'blacklist' but merely a database, which is for the benefit of the lending institutions. He said CRIB has been conducting public awareness cam

paigns since 1998 in order to make the public aware that defaulting in credit card payments could result in their details being included in CRIB. "It is the law and I hope everyone is aware of it," he said. On verification, Hatton National Bank officials said they inform their customers when such details are sent to CRIB.

A bank official said customers are told in writing that if payments were not made on time CRIB would be informed. An HSBC official said that since June this year, they have inserted a new clause into the terms and conditions of the credit cardholder's agreement saying, "the cardholder hereby consents and acknowledges that the Bank is entitled to report him to any relevant CRIB list internationally, in the event of default of any transaction."

The snap Sunday Times FT survey amongst 50 respondents revealed that 72 percent of credit cardholders were unaware that their details would go to CRIB if they default in payment. Some 50 percent were unaware that banks and lending institutions use CRIB to ascertain the credit-worthiness of those who apply for loans. About 94 percent of the credit cardholders said the banks and credit card companies should inform them before sending details to CRIB. CRIB was set up in 1990 as an initiative of the Central Bank.

Its shareholders are the Central Bank, commercial banks, specialized banks, finance companies and leasing establishments, with the Central Bank being the biggest shareholder. Banks and lending institutions get clearance from CRIB for those who apply for loans in order to ascertain the creditworthiness of the applicant. CRIB data is presently available only to its shareholders but Amarasena said in future the agency would permit government institutions, mobile and telephone providers and other companies which give goods on credit, access to its database.

“We should be told”
Some comments from respondents in The Sunday Times FT survey on credit cards:

  • I thought an action was filed for recovery of debt before CRIB was informed. I was not aware that the notification was automatic. Cardholders should be made aware.
  • It's worth asking the banks and CRIB what happens if for example a credit worthy customer is abroad for 3 months and the credit card bill is unpaid for 3 months."
  • Anything that could cause me to be discriminated against because of possible bad credit should be reported to me as a warning several times so that I have every chance to make restitution before my name/goodwill is forever tarnished publicly."
  • One of the problems is that financial literacy is poor in Sri Lanka. Even if the customer is made aware it would be in the small print in the card application which most of us never read. I guess that's where the media steps in to fill in the information void."
  • CRIB should have information on default loans, advances and card balances after giving a reasonable period of time for the customer to settle. Failing which you would find bad customers borrowing from all over the place, as obtaining credit cards are quite easy these days.
  • Banks must forewarn their clients. If not even for small outstanding amounts the clients' names will be sent to the CRIB. Consequently the client's reputation and standing would suffer.
  • What happens if there is a dispute between the bank and the client regarding a specific payment where the client may have a justifiable reason not to pay? It then becomes blackmail if the bank unilaterally posts the client's name with the CRIB. This is totally unfair and unethical.
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