In a turbulent economy where many are finding it difficult to make ends meet, default of loans is common and the level of personal indebtedness is continuously escalating. Financial institutions are now extremely cautious about lending and they are making greater enquiries about the full borrowing history of individuals and companies before lending.
The Irish Credit Bureau (ICB) is the main source of information for mainstream lenders. The ICB is owned and financed by its members, which are mainly financial institutions. Membership of the ICB has increased from 40 in 2009 to well over 200 members. Essentially, the ICB is a credit register that collates information on the credit history and arrangements of bank customers. Each of its members registers information with the bureau on a monthly basis.
When making a loan application, the lender will request your consent to send information about your repayments to a credit referencing agency and to obtain information about your credit history. It is, therefore, very important to protect your personal credit rating if you intend to apply for a mortgage, car loan, personal loan or credit card in the future.
The ICB holds information about the loan and the customer’s repayment performance for the full duration of the loan whether it is 3 years or 30 years. Furthermore, the information is retained on the database for five years after the loan is terminated. Any missed payments or arrears on an account are automatically passed on to the ICB register. This enables lenders to assess previous performance on credit agreements and determine the customer’s credit rating, whether good or bad. Only creditors who are members of the ICB can access data on customers. It is interesting to know that in other jurisdictions, one’s personal credit information can be accessed by non-creditors i.e. employers, hospitals, landlords. The ICB has not extended its register in this regard.
The information held by the ICB is extensive. A credit report will include details of the following;
- Name, date of birth, contact details, addresses
- Names of lenders and account numbers active within the past five years
- Number and frequency of applications for credit
- Missed repayments and loans unpaid
- Settlements regarding loans
- Legal action by lenders
By law, all banks and financial institutions in Ireland are obliged to provide an honest and truthful record of your credit agreements and transactions. Under the Data Protection Acts 1988 and 2003, you are entitled to inspect your own personal record on the ICB database. You can make a credit report application for a fee of six euro. If you discover an error in your credit report, you are entitled to have this amended and in certain circumstances, you may also have the right to have the information removed from your file. For example, your lender may agree to postpone repayments temporarily but forget to inform the ICB and this should be recorded so it will not affect your credit rating. We are all aware of the recent technical issues experienced by Ulster Bank which led to missed payments by customers to other banks. In that case, the ICB issued a notice that it was working through the issue with Ulster Bank to ensure that customer profiles were not incorrectly and adversely affected. It is important to note that the ICB will only make a change to your credit report at the request of your lender. If your lender does not co-operate in this regard, you can make a formal complaint to the Office of the Data Protection Commissioner.
Currently in Ireland, there is no statutory obligation on financial institutions to report credit data. The system of credit reporting is voluntary. It is thought that the lack of a centralised credit registry was one of the main contributors to Ireland’s reckless lending in the past number of years. Accordingly, more and more lending institutions are now becoming members of the ICB and other credit bureaux.
Furthermore, the Government plans to introduce new legislation in the form of the Credit Reporting Bill which is due to be published in September 2012. The Bill will provide for the establishment of a “Central Credit Register”. There will be an obligation on all credit providers to furnish certain credit information to the register which will amount to a regulated database of debtors’ payments and credit histories. This proposed Bill and the Central Credit Register form part of the conditions prescribed by the EU/IMF Programme of Financial Support. It is clearly intended that a person’s credit rating will be crucial in the assessment of their loan application with a view to eliminating the catastrophic lending policies of the past. The necessary frameworks will be put in place to ensure that informed decisions can be made by all credit providers going forward. In light of this, all borrowers should be conscious of their credit patterns and the potential impact of same on future lending.