Published 07 September 2018
Buckie Got It, St. Kitts and Nevis News Source
Presentation by the Minister of Finance and Prime Minister, Dr. the Hon. Timothy Harris, in Parliament on the Bill entitled Credit Reporting Bill, 2018, September 06, 2018
Mr. Speaker, with your leave, I rise to present the Credit Reporting Bill, 2018.
This Credit Reporting Bill, which is being presented for a second reading before this Honourable House, constitutes an essential part of the strategy for strengthening the legal and business underpinnings required to support a modern credit reporting system and to maintain financial stability in the Federation.
The primary objective of the Bill is the establishment of a regulatory and supervisory framework to support an advanced and fair credit reporting system in St. Kitts and Nevis and by extension the Eastern Caribbean Currency Union (ECCU). The Bill supports the establishment of a credit bureau to improve the collection and sharing of credit information across the ECCU. For the information of the general public, a credit bureau is an agency that collects information from creditors, other relevant credit information sources and available public sources (e.g. Court of Justice) on a borrower’s credit history. The purpose of the credit bureau is to collate information that would indicate the borrowing behaviour of customers to create what is called a “credit history.” The bureau compiles information such as repayment records, court judgements, and bankruptcies. A comprehensive report is then created that is made available to the creditor at a cost. This information assists creditors to improve their assessment of the creditworthiness of a borrower. The credit bureau would be allowed to collect information from credit providers such as banks, credit unions, insurance companies, mortgage companies, and also public sources like the courts, civil records offices, and social security boards.
This Bill, Mr. Speaker, is to be implemented in all member states of the Currency Union – ECCU. We are dealing here with uniformed credit reporting legislation, intended to impact the development and regulation of credit reporting systems for the Organization of Eastern Caribbean States (OECS). The aim is to create a credit reporting system for the OECS.
It represents a modern piece of legislation, which establishes the legal framework for an advanced and improved credit reporting system throughout the ECCU. It is a system that will facilitate the flow of relevant and critical information to support decision-making in respect to credit and loan agreements. The Bill would enable the sharing and reporting of financial information within the financial system. Mr. Speaker, I hasten to assure our citizens that the Bill and the accompanying Regulations would provide the necessary safeguards to protect the interest of consumers. The legislative drafters have ensured that certain consumer protection principles are embedded in the Bill. The Bill provides principles for accuracy, confidentiality, and proper use of credit information. It also addresses other pertinent matters such as: licensing of persons who wish to offer credit reporting services, persons who can request a credit report, eligible credit information providers, accessibility by customers to their credit information, general offence in relation to the providing of false information and handling of customer complaints.
Benefits
This Bill will help to improve the quality of credit information provided to lenders and overall efficiency in the distribution of credit in the Eastern Caribbean Currency Union and St Kitts and Nevis in particular. It will help to reduce credit risks, processing times, costs and over-reliance on collateral to back credit.
It is generally acknowledged that access to credit markets is a critical driver of economic growth and household welfare, given its role in enabling individuals to supplement income and undertake long-term investments such as education and mortgages as well as providing working capital for businesses. Mr. Speaker, credit is important to all of us at the individual and macro level.
When we look at, for example, the historic start of our second cruise pier, which was promised for over 20 years, financing was critical to its execution. We were able to do what no administration 20 years before us could have done because of the confidence the financing and investing markets had both in SCASPA and the Government.
The largest domestic syndicated arrangement in the history of our Country was mobilized to provide around US $48 million to give St Kitts and Nevis the historic second cruise pier and the enduring benefits of an expanding cruise and commercial upland development in Basseterre.
I again commend the participating entities such as St. Kitts-Nevis-Anguilla National Bank Limited for investing US $34 million, the St. Kitts and Nevis Social Security Board (US $7 million), the St. Kitts and Nevis Sugar Industry Diversification Foundation/SIDF (US $5 million), and St. Kitts-Nevis-Anguilla Trading & Development Company Limited/TDC (US $2 million). Of TDC’s US $2 million, TDC Insurance Company Ltd. (formerly SNIC) and TDC Financial Services Company Ltd. (formerly FINCO) each invested US $1 million.
Credit reporting is the intermediation of information on borrowers, private individuals as well as companies, including small and medium-sized enterprises (SMEs). The credit reporting system is a critical element of the financial infrastructure because it promotes transparency, price efficiency and improved risk management in the financial market. However, credit reporting systems in the OECS and CARICOM Member States are relatively underdeveloped and this is often reflected in relatively inefficient credit markets, which are characterized by higher borrowing costs, the over-reliance on the use of collateral, delayed credit approvals, and credit rationing thereby resulting in the under-funding of some quality projects. In addition, the absence of functioning credit bureaus in some Member States and the lack of formal arrangements to facilitate the cross border exchange of credit information inhibit the integration of credit markets within the Currency Union and wider CARICOM Community. The introduction of a credit reporting system, which promotes transparency, should therefore result in some efficient credit-allocation decisions and promote financial inclusion.
Mr. Speaker, moving to the substance of the Bill.
The Bill sets out:
- The regulatory and supervisory framework
- Limits on access to data/data protection
- Consumer rights framework
- Minimum criteria for credit reporting service providers
- Assignment of liability conditions for participants in the system.
The Bill provides for the Eastern Caribbean Central Bank (ECCB) to be designated as the supervising authority and to be charged with responsibility for the day-to-day administration, supervision and implementation of the legislation and accompanying regulations. This institution also has the authority to review and recommend applications for license to the Minister of Finance and maintain general supervisory oversight of the credit reporting regime in the ECCU. Mr. Speaker, the Bill is divided into nine (9) Parts. Please permit me to highlight some of the salient features of each Part as follows:
Part I: Preliminary, Clauses 1 – 2 address preliminary matters such as the title, commencement and the interpretation of terms used in the Bill.
Part II: Administration, Clause 3, as mentioned earlier, the Eastern Caribbean Central Bank will have responsibility for the overall management of the Act; and will have authority to regulate and supervise the permissible activities of credit bureaus, credit information providers, subscribers and their agents in the Currency Union. The Central Bank will have the authority to grant licenses to credit bureaus and also revoke licenses, where necessary, in the Currency Union. The ECCB is further charged with the responsibility to protect the integrity of the credit reporting system in St. Kitts and Nevis against abuse and to take measures to protect the rights and interests of consumers. This regulatory role is not new as the ECCB already regulates our Banks.
Mr. Speaker, Part III: Licensing of Credit Bureaus, Clauses 4 – 16
The Bill will establish a licensing framework for the Central Bank to issue, suspend, refuse to grant, and revoke licenses to carry on consumer and corporate credit reporting business. The issuance of a license will authorize a credit bureau to operate within the territorial space of the Currency Union. An application for a license to operate, or carry on the business of, a credit bureau in the Currency Union shall be made to the Central Bank and include the following documents: a) Statutory declaration of the proposed chief executive officer, directors, officers and significant shareholders; b) information, to the satisfaction of the Central Bank, regarding the startup capital of the credit bureau; c) Certificate of Incorporation, proposed operations manual and operating systems including IT systems; and proposed location(s) for business operation.
Clause 9, Terms and Conditions of License –The ECCB will be given the authority to grant licenses to entities who wish to operate or carry on the business of a credit bureau in the ECCU. A credit bureau license will be issued to an operator that can provide all the ECCU territories with the most efficient, reliable and high-quality credit reporting service. The Bill will enable the Central Bank to set the terms and conditions of the license. Failure by the credit bureau to comply with the terms and conditions of the license granted to it by the Central Bank is considered to be an offence and is liable, on summary conviction, to a fine of ten thousand dollars.
Clause 11 restricts a credit bureau from selling, leasing or transferring title of any of its credit files to another credit bureau licensed under this legislation without obtaining approval from the ECCB. Failure to comply with this provision is considered an offence and the credit bureau would be held liable, on summary conviction, to a fine of ten thousand dollars. In the case of a continuing offence, the offending bureau would be liable to a further fine of two thousand dollars for every day that the failure to comply continues after conviction.
Clause 12 outlines restrictions on employment of certain persons. A credit bureau shall not employ any person who is an undischarged bankrupt; anyone who has entered into a composition or scheme of arrangement with his/her creditor; was convicted of an offence involving fraud or dishonesty; or was removed from office under the provisions of this Act and/or the Regulations. If such a person is employed by a credit bureau, that person will be disqualified from holding any office in the credit bureau.
Failure to comply with the provisions of this section of the legislation is considered an offence committed by the credit bureau and would be liable, on summary conviction, to a fine of ten thousand dollars and in the case of a continuing offence would be liable to a further fine of two thousand dollars. In the case of the disqualified person acting as an officer or employee of the credit bureau, such a person commits an offence and is liable, on summary conviction, to a fine of ten thousand dollars or to imprisonment for a term of six months
Clauses 13 to 16 address payment of fees; material change in circumstances affecting credit bureau; suspension and revocation of license; and publication of grant of license. Clause 13 outlines the processing of fees and stipulates that a credit bureau shall pay a fee to the Central Bank in the amount prescribed by the Minister on the recommendation of the Central Bank.
Part IV: Activities of the credit bureau, Clauses 17 – 32
Mr. Speaker, Clauses 17 to 32 establish the functioning of credit bureaus. The Bill requires the credit bureau to manage its business and operational risks in a responsible and secure manner to ensure the safety of customers’ credit information. The Bill stipulates the circumstances under which credit bureaus can collect, use and disclose customer credit information. Note the requirement that a data subject must consent to the release of information on the data subject. Credit Bureaus will be required to safeguard the confidentiality, security, and integrity of customer information. The ECCB will regulate and supervise the activities of credit bureaus, credit information providers, subscribers and their agents in the ECCU.
Part V: Supervision by the Central Bank, Clauses 33 to 39 outline the supervisory role of the Central Bank, which includes information-gathering powers, inspections, warrants, Central Bank orders, audits and court orders. Clause 37 mandates that the person on behalf of whom the inspection or inquiry is conducted shall pay all reasonable fees and costs for the inspection or inquiry, including all reasonable costs of any travel undertaken in the course of the conduct of the inspection or inquiry.
Part VI of the Bill addresses Civil Liability issues and proposes actions to be taken in cases where an individual or business suffers as a result of failure of a person to comply with any of the requirements imposed under this Act or Regulations.
Mr. Speaker Part VII: Credit Reporting Review Commission, Clauses 41 to 44 provide for the establishment of a Review Commission for the purpose of hearing and determining applications for review. The Bill empowers the Review Commission to hear and determine applications by an aggrieved data subject/customer in the event that the credit bureau does not issue a decision within the prescribed time for resolving disputes. An aggrieved credit bureau may also seek a review of the action or decision of the Central Bank. Every credit bureau and credit information provider can take steps to resolve disputes. The Central Bank may issue directions respecting resolution of disputes.
Part VIII of the Bill addresses Appeals to the High Court and also to the Court of Appeal.
Part IX: Miscellaneous Provisions, Clauses 47 to 57 set out the establishment of offences, penalties, protection of databases upon liquidation and immunity provisions.
Conclusion
Mr. Speaker, it is clear from this brief presentation that the Credit Reporting Bill that is under consideration by this Honourable House is very relevant and timely to help the development of the Financial Services Sector in St. Kitts and Nevis. As indicated earlier, it is a modern piece of legislation that would provide for a fair and accurate credit reporting system within the financial space in order to assure objective credit decisions. It enables credit information sharing and reporting. It provides for the regulation of the conduct of credit reporting and credit reporting services, and provides for data protection of consumers of credit providers.
It is recognized that the Credit Reporting Bill will introduce a new standard and an appropriate legal and regulatory framework to enable the operation of a more effective credit system.
In today’s financial system, effective credit reporting mechanisms have become very important. Credit information sharing is critical for the growth of credit and improving access to financing right here in our Federation. The Bill therefore offers a good opportunity for us to move our Federation into the modern age and facilitate strengthening of the Financial Services Sector. Moving in this direction would also help to demonstrate the country’s commitment to addressing important gaps in the Federation’s legal and regulatory framework.
The member Governments of the ECCU are also required to consider the Credit Reporting Regulations that would help to operationalize this Bill when enacted. The Regulations specify matters pertaining to the licensing process, such as the form of application, licensing fees, and documentation requirements. The Bill has already been passed by three of the eight ECCU member states, namely Antigua and Barbuda, Grenada and St. Vincent and the Grenadines.
Mr. Speaker, the benefits to our Federation are clear. The Bill had its first reading earlier this year and now it is my pleasure to recommend that we complete the process today by passing the Bill into law.
May it please you, Mr. Speaker
