Legal And Regulatory Issues in Credit Bureau Development

This presentation discusses the need for credit bureaus (CBs), their features and their regulation, focusing mainly on South Asia.

The presentation:

• Sets out the various contexts that make a law is necessary for CBs;
• Describes the history of the CB;
• Emphasizes the many disadvantages of state owned/run CBs;
• Details the importance of the public sector or central banks in the development of a credit reporting system;
• Sets a target for CBs in South Asia and stresses that they should be:
  • Self-sustaining and profitable;
  • Privately owned;
  • Efficient and competitive;
  • Able to facilitate data collection and exchange, etc.;
• Lists the following steps to an ideal credit system:
  • Remove central bank as shareholder;
  • Corporatize the CB;
  • Publicize the role of CBs and build public confidence in them;
• Describes an enabling legal framework, suggesting its legal provisions, regulations that empower the Central Bank, its provisions for consumer protection, the need for flexibility, etc.;
• Uses the United States 'Fair Credit Reporting Act' to illustrate its points;
• Informs about consumer protection and the principles of fairness, privacy, accuracy and transparency;
• Discusses various points about the information provided by CBs.

It concludes by highlighting the importance of a clear legal and regulatory framework; publicity and trust, consumer-rights, appropriate dispute resolution and reasonable penalties for non-compliance in the orderly development of a credit reporting system.