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May 30, 2019

The CREDIT REPORTING ACT 2017

 

Before this Act, the credit bureau industry started as a regulated industry with the release of the Guidelines for the Licensing, Operation and Regulation of credit bureaus, released and became effective in 2008, revised in 2013.

The bill for the Credit Reporting Act was:

  • Sponsored by the Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Rafiu Adebayo Ibrahim (PhD, FCIB)
  • Reviewed in a Public Hearing at the National Assembly on 8th February 2017
  • Fully supported by the Executive arm of the FG, under the platform of Presidential Enabling Business Environment Council (PEBEC); this facilitated accelerated passage of the Bill into Law

The bill was signed into law by the Acting President, Prof. Yemi Osinbajo (SAN) on May 30, 2017.

The Act is a legal document to serve as a guide for better practices and operations in the Credit Bureau Industry. The existing CBN guidelines regulating the operations of Credit Bureaus shall forthwith be read in such manner as to bring its provisions in conformity with the Act.
Objectives of the Act

  1. To enable and encourage better access to credit and improve risk management in credit transactions.
  2. To encourage access to accurate, fair and reliable credit information and protect the privacy of such information.
  3. To set standards and conditions for the establishment, regulation and operations of credit bureaus.
  4. To promote responsibility in the credit market by encouraging responsible borrowing, avoidance of over-indebtedness and fulfillment of financial obligations by all affected parties.
  5. To improve credit information sharing.

Some Salient Provisions of the Act

  • To use a credit bureau as either a user or a data provider, you must enter into an agreement with the Credit Bureau (CB).
  • Information on indebtedness can be submitted to a CB without obtaining the consent of the debtor. On the other hand, the credit information user must obtain the consent of the data subject to access the information from CB.
  • Information from a CB on a data subject can be accessed only for permissible purposes.
  • Every person is entitled to one free credit report in a year from the CB.
  • Various penalties including monetary and imprisonment are applicable for the contraventions of the provisions of the Act.
  • CBN empowered to issue guidelines from time to time to complement the provisions of the Act.

Permissible Purposes for accessing data subject information include:

  • Applicant or a guarantor for credit
  • Review, renew, restructure or monitor credits
  • Employment checks
  • Prospective tenants
  • Underwrite, review, or renew insurance policies or analyze insurance claim
  • Application for credit contracts or other post-paid services
  • Debt collection, enforcement of a monetary judgment or enforcement of any other debt
  • Carry out KYC checks on any person for any permissible purposes
  • Directive of a regulatory authority or a public body
  • Compliance with a court order

Credit Information Providers recognized in the Act include the following entities:

  • Banks, specialized banks and other financial institutions
  • Leasing companies
  • Insurance companies
  • Cooperative societies and institutions that offer credit to SMEs
  • Utility companies including electricity, telecommunications and water corporations
  • Asset management companies
  • Suppliers of goods and services on a post-paid, deferred or instalment payment basis
  • Entities that in their ordinary course of business have relevant information that complies with Permissible Purposes
  • CBN’s CRMS.

There is no limit to the amount of indebtedness that can be submitted to the CB – no minimum or maximum amount. CBs will retain the information submitted to it for a period of not less than 6 years, and archived for additional 10 years, from the date it is submitted or last updated.

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