Pursuant to the previously effective regulations a comprehensive reporting system of debtors’ credit history was available only with respect to companies. As far as retail customers’ credit information was concerned only so-called “negative data” of the debtors ( data which is related to the breach of the financial agreement ) were managed and used for credit assessment.
The newly introduced Act CXXII of 2011 on the Central Credit Reporting System (the “Act”) establishes a comprehensive retail credit reporting system. The primary aim of the Act is to provide a more substantial basis for credit assessment and to provide more information regarding the solvency of retail customers. In the “full data” or “full list” system, credit applicant customers are registered together with all of the “positive data” of their financial agreements (i.e. data which is not related to the breach of the agreement but its due performance). The “full list system” is not a replacement of the existing “negative” credit reporting system under Act CXII of 1996 on Credit Institutions, but rather an addition.
The so-called “positive data” in relation to the financial services agreements, commercial loan agreements and student’s credit agreements can be disclosed to other lenders and investment service providers only with the prior consent of the retail customer. However, the Central Credit Reporting System will also include a reference to the fact if a customer did not consent to such disclosure. Fata privacy professionals criticised this provision of the Act, indicating that the mere fact that the customer refused the consent for the disclosure of the “positive data” may suggest lenders that the customer has something to hide in the credit history.
Under the Act, the following “negative data” may be disclosed from the Central Credit Reporting System to other lenders and investment service providers without the consent of the retail customer:
- Non-compliance with payment obligations under financial services agreements, commercial loan agreements, student’s credit agreements if (i) the amount overdue and unpaid exceeds the lowest minimum wage applicable on the date of default, and (ii) such default exceeding the minimum wage is continuous for more than 90 days
- Data provided at the time the above agreements were initiated, was incorrect, false or documents submitted were forged, but only if such can be proven with documents
- Unauthorised transactions, the use of cash equivalent instruments by the owner of identification data required for the cash equivalent instrument or the use thereof, following a report that such identification data was no longer in the possession of the owner, or in the event of other misuses of cash equivalent instruments as defined in the Criminal Code of Hungary.
In addition, the Act stipulates information obligations to be performed vis-à-vis the consumer:
- prior to the conclusion of any agreement in relation to the data received from the Central Credit Reporting System, the conclusions drawn with respect to the creditworthiness of the natural person shall be disclosed, and
- if necessary, the natural person shall be warned of risks of taking out credit.
The Act also stipulates detailed procedural rules, although shorter than those previously in force, regarding the obligation to inform customers and the handling of customers’ complaints. The time open for managing complaints shall be 3 days instead of the previous 15 days.
The Act is effective as of 11 October 2011.
Lenders and investment service providers have relatively tight deadlines to ensure compliance with the new rules:
- 30 days to inform their retail customers of the new rules and modify their contracts and general terms accordingly,
- 60 days to transfer the credit data under the effective agreements to the Central Credit Reporting System and to obtain the data privacy consent of the customers, and
- 180 days to transfer the credit data under the agreements closed in the preceding 5 years to the Central Credit Reporting System and to obtain the data privacy consent of the customers.
It is expected that as the result of the introduction of the Act the “negative debtor register” may become more balanced once the Central Credit Reporting System can provide a comprehensive view of the debtor, and data other than that related to breaches of agreements by the customer-debtor will also be available. In light of the availability of such information, banks are expected to be able to assess faster and more precisely if and how credits to be disbursed will be repaid. Banks may therefore be able to find financially non-solvent debtors more effectively. It is thought that this will limit the risk of customers running into debts to an extreme extent, and, furthermore, it may also help to reduce debts accumulated as a result of non-payments.
Law: Act CXXII of 2011 on the Central Credit Reporting System