Negative credit data

WITH THE ENACTMENT OF THE Credit Information System Act, or Republic Act No. 9510, a comprehensive and centralized credit database will soon be in place in the country.

The collection and processing of information will be handled by Central Credit Information Corp. (CCIC), which will initially be 60- percent owned by the government and the rest of the stocks will be held by the private sector.

As discussed in last week’s column, the entities that accept deposits from and extend credit facilities to the public are required to submit to CICC basic credit data—both positive and negative— about their customers or clients.

These data, which should not be more than five years old from Nov. 28, 2008 (the date the law became effective), may be submitted in phases, depending on the capacity of the entity concerned.

On the basis of the facts and figures provided by CICC, banks, financing institutions and credit card companies can objectively (and more expeditiously) decide on the credit worthiness of applicants for credit facilities.

Thus, under normal circumstances, applicants with good credit track records can look forward to favorable action on their requests for additional financing or higher credit lines.

Correction

Those who, in the past, reneged on their repayment commitments or failed to pay the minimum payment amounts on their credit cards may not find easy sailing in their transactions with financing institutions.

The negative information that should be reported includes defaults on loans, foreclosures, bankruptcy, inclusion in bouncing checks lists, and cancelled credit cards.

These incidents are the “red flags” that make credit investigators sit up and take a close look at the paying capacity of present and future clients.

If the debts have been paid or settled, the negative information has to be corrected by the company within 15 days from receipt of notice of the payment or settlement.

The correction, however, does not mean the immediate removal of the black mark from the database—it will remain for at least three years from the date the account is cleared.

Considering the adverse effects of negative information to a person’s or company’s credit reputation, especially to business people who depend on steady credit lines, the submitting entities are required, at the outset, to notify their clients about their reporting obligations to CICC.

In turn, the clients have the right to have immediate access to those data, subject to the payment of the prescribed fees for that purpose.

Right of relief

And more important, they have the right to dispute erroneous, incomplete or misleading credit information.

If any correction is made, the affected party should be informed within five working days of such action or the conclusion of any investigation conducted for that purpose.

For the public’s further protection, the submitting entities have to organize dispute resolution processes within their respective systems to expedite the resolution or settlement of contested credit information.

In case relief cannot be obtained through this mechanism, the aggrieved party can run to CICC for relief.

Within five working days from receipt of the complaint, CICC is obliged to investigate and verify the disputed negative information.

If, despite earnest efforts, the disputed data cannot be verified or proved, it shall be deleted from CICC’s database.

For good measure, all entities that have access to or received the disputed data shall be immediately informed of the action taken so they can make the proper adjustments in their own databases.

Confidential

Under the law, CICC and the entities that are given access to its database are under strict obligation to maintain its confidentiality.

The information can be used solely for the purpose of establishing the creditworthiness of the parties who want to avail of credit or financial facilities, and nothing else.

The officials, employees and staff of the entities authorized to examine or use the credit data may be held liable for fines and penalties if they violate the confidentiality rules or use the information for any other purposes.

These sanctions are in addition to the damages that a credit data subject may claim if the rights earlier mentioned are not observed by the companies concerned.

The creation of a comprehensive credit database should not, however, be interpreted to mean that the law on the secrecy of bank deposits has been relaxed.

That law, together with the Anti-Money Laundering Act, continues to remain in effect and no provision in the law creating CICC can be invoked to negate, directly or indirectly, their declared objectives.

Considering the complexity of our credit and financing systems, it may take some time before CCC gets into full gear. But this early, those who may be inclined to take their credit obligations lightly are forewarned that Big Brother is watching. –Raul J. Palabrica, Philippine Daily Inquirer

(For feedback, please write to rpalabrica@inquirer.com.ph)