What's Your Credit Score?
If you have cable T.V. chances are you have seen advertisements for websites like freecreditscore.com. A credit score is a number representing the creditworthinessof an individual and the likelihood that that individual will pay his or her debts. Lenders use credit scores to evaluate the potential risk of lending money to consumers.
Until fairly recently the concept of obtaining a credit score in order to get a loan or enter into commercial transactions was foreign to Jamaica. This was before the Credit Reporting Act (the "Act") was passed in 2010 and its Regulations in 2011. Under this Act, companies may apply to become licensed credit bureaus, able to disclose "credit information" about a consumer in return for monetary reward.
The Act defines credit information as:
- the amount and nature of loans or advances or other credit facilities;
- the nature of the security taken from a consumer in respect of credit facilities (including lease financing or hire purchase arrangements);
- the nature of any guarantee or other non-fund based facility;
- information as to a consumer's financial means, creditworthiness or history of financial transactions (including antecedents and adverse court judgments); and
- analysis of the information above including any conclusions as to creditworthiness, whether in the form of a system of numerical or alphabetical scores or otherwise.
Credit bureaus will be able to obtain credit information from entities such as banks, financial institutions, building societies, credit unions, the Development Bank of Jamaica and licensed securities dealers. Of note, they will also be able to obtain information from the National Housing Trust and the Students Loan Bureau. As such, defaulting on a student loan may now have a more severe consequence of negatively affecting your credit worthiness. Credit information may also be obtained from persons who carry on the business of selling goods under hire purchase, credit sale or conditional sale agreements. Consequently, failing to make your payments on a living room set you bought under a hire purchase agreement may actually prevent you from getting a loan to purchase a home. The entities described above are collectively referred to in the Act as "credit information providers".
Credit information should only be disclosed by a credit information provider to a credit bureau where the provider is satisfied after making all reasonable enquiries and investigations that the information is reliable. Information will be considered to be reliable if it is accurate in all material respects, is presented in a fair and balanced manner and does not include personal information on the consumer without the consumer's written consent. A credit bureau commits an offence under the Act where it releases credit information obtained from a source other than a credit information provider or credit information it knows or suspects is false or misleading.
To whom can credit bureaus disclose the credit information obtained? The consumer to whom the information pertains, the supervising authority being the Bank of Jamaica, by order of a Court, a police constable (who furnishes the required declaration) for the purpose of identification of a consumer and to a credit information provider. The consent of the consumer must first be obtained and presented to the credit bureau before it can disclose information to a credit information provider. The information obtained by a credit information provider can then only be used or disclosed for the purposes outlined in the Act, primary of which is in connection with the extension of credit to the consumer to which the information pertains. With the written consent of the consumer, the information may also be disclosed for the purpose of the employment of the consumer, the underwriting of insurance or to facilitate a transaction involving the consumer.
As a consumer, one may become worried about your credit information being leaked to the public. The Act imposes an obligation of confidentiality on credit bureaus, credit information providers and their past and present employees. In fact, the Regulations to the Act require applicants for licenses to detail their technological capacity such as their software programs and security measures, disposal procedures namely how they dispose of information deemed to be inaccurate and policy and procedure manuals which must speak to the security of consumer information.
Where a consumer becomes concerned about the source of any credit information, he or she can request that the credit bureau disclose the nature and substance of all information pertaining to that consumer, the sources of such information and the persons to whom the information was disclosed. The Act also outlines a procedure by which consumers can lodge a complaint with a credit bureau regarding the accuracy or completeness of any information disclosed by the credit bureau. Where any information is corrected or completed the credit bureau must resend this information to all persons to whom the inaccurate information was disclosed. If a consumer is dissatisfied with the steps taken by a credit bureau in response to a complaint, the consumer may also lodge a complaint with the supervising authority, the Bank of Jamaica.
A number of local and foreign entities have submitted applications to the Bank of Jamaica to be licensed under the Act as credit bureaus. As such, what was once a foreign concept will soon be a common part of our financial landscape, with many lenders changing how they conduct credit assessments and risk management. Before long, everyone will need to know their "credit score".
Simone Bowie Jones is an Associate at Myers, Fletcher & Gordon and is a member of the firm's Commercial Department. Simone may be contacted via firstname.lastname@example.org or www.myersfletcher.com This article is for general information purposes only and does not constitute legal advice.