The Credit Information Bureau (CRIB) usually conjures up notions of loan defaulters, debtors and swindlers but these are all misconceptions according to CRIB Director/General Manager Gamini Karunaratne.
In an exclusive interview with the Sunday Times FT, Mr. Karunaratne said CRIB stores the credit information, good and bad, from all authorized lending institutions such as banks, specialized and commercial banks, leasing houses and finance companies toalling 96, which are compelled by law to report credit information.
“Good and bad borrowers are in the system,” Mr. Karunaratne explained. An individual or a corporation that has taken out a loan will be reported to CRIB and a history of their loan repayment can be viewed by any other authorized lending institutions if they are seeking another loan. “There are millions of customers who have great credit history,” he said. CRIB will also be embarking on extensive awareness programmes to clarify the misconceptions that exist among the public.
Mr. Karunaratne described CRIB as an indispensable tool for financial institutions as they are able to view an individual’s credit history, income details and repayment capability. In fact, requests for credit reports from these institutions increased noticeably after the end of the war in May 2009, now averaging about 4,500 per day from 2,800 previously. Mr. Karunaratne said this increase may be due to an increase in credit or more likely, an increase in non-performing assets. CRIB issued a total of 818,000 credit reports in 2008.
CRIB
CRIB is a statutory body that was established under an Act of Parliament in 1990 and credit reports can only be obtained by the 96 stakeholders. However, they must provide their loan portfolio and a signed loan application to CRIB in order to request credit reports. By December 1, 2009, individuals can request a copy of their own credit report to verify the information.
“This is the advantage of issuing credit reports to people,” Mr. Karunaratne said. Banks must update the information monthly and in the process of entering data on thousands of individuals and corporates, a few cases are misreported. In those instances, CRIB will take the matter up with the bank concerned for corrective action. In order to avoid errors, he said the CRIB system must be made compatible with the systems used by banks.
Misuse of credit reports can lead to that particular financial institution being barred from accessing CRIB for a period of time until an inquiry is conducted and the matter is resolved. Individuals who misuse credit information may face up to an Rs.1 million fine and up to 5 years imprisonment.
Future
From November 2009, individuals who have had more than 3 returned cheques due to insufficient funds will be reported to CRIB. Mr. Karunaratne said the financial market has been plagued with cheque return problems but with this new provision, banks can rquest credit reports when individuals open current accounts to see if there is a history of writing bad cheques which is a criminal offence.
CRIB is also looking to expand its services and diversify its user groups to include utilities payments such as telecom, gas and electricity in order to track credit history. However in the telecom industry for example, the laws prevent companies from providing information on clients. Mr. Karunaratne said those have to be changed.
The Secured Transaction Act No. 49 of 2009 was passed on September 25 to protect institutions that lend against movable items such as vehicles and machinery. Mr. Karunaratne explained that currently, people are taking loans from several institutions against the same movable item so this Act, upon implementation, will provide security for creditors.
CRIB is exploring the option of putting credit reports online but there are several issues such security concerns and the potential misuse of information that must be sorted. CRIB is also looking to start credit scoring by 2011.
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