The Monetary Authority of Singapore (the "MAS") is currently conducting a one-month public consultation between 12 August 2014 to 12 September 2014 on the proposed credit bureau regulatory framework and Credit Bureau Act (the "CBA") to strengthen oversight of credit bureaus. As part of the public consultation exercise, the MAS also issued the "Consultation Paper on Proposed Credit Bureau Regulatory Framework and Credit Bureau Bill".
Credit bureaus and their members
Credit bureaus are organisations that collect, use and disclose information relevant to the credit worthiness of borrowers ("credit data") and only for the purpose of facilitating credit assessments by their members. Members of the credit bureaus are usually lenders, such as banks, finance companies and credit card companies, who use the credit data to facilitate their credit assessments and loan underwriting decisions. In Singapore, there are currently two credit bureaus that are recognised by the MAS under the Banking Act to collect and disclose credit data to their members.
Rationale for the proposed Credit Bureau Act and supervisory regime
The MAS is of the view that credit bureaus should be subject to a more formal oversight because of the increasing and more detailed credit data that is being collected which involves a significant amount of sensitive personal information. The proposed CBA is intended to ensure that credit bureaus protect the credit data and consumers' interests.
Scope of the proposed Credit Bureau Act
The MAS has highlighted that the CBA will cover the following key areas:
- Licensing of credit bureaus: The MAS will establish a licensing framework to issue, renew, suspend and revoke licences of credit bureaus in Singapore. Each licence will be valid for a period of five years. There will be admission criteria as well as ongoing requirements for a licensed credit bureaus ("LCBs") to continue to be licensed.
- Supervisory powers over LCBs and their members: The MAS will have supervisory and enforcement powers over LCBs. For instance, the MAS may gather information, inspect, investigate, issue directions, impose financial penalties and compound offences. Members of the LCBs are also subject to the MAS' investigation powers if there is a suspected breach of regulatory requirements.
- Formalise obligations of LCBs and their members: As the MAS expects LCBs to manage their business and operational risks appropriately, there will be provisions in the CBA to formalise certain key obligations. For instance, LCBs and their members would be required to ensure that high standards of data confidentiality and security are upheld in relation to the collection, use and sharing of bank credit data. To ensure data integrity, members of LCBs must contribute accurate and complete data to the LCBs in a timely manner. LCBs should also maintain and disclose similarly accurate, complete and timely credit data to their members. There will also be a requirement for LCBs and their members to adopt clear and effective procedures to facilitate investigation and rectification of credit data when consumers dispute the accuracy of their credit data held with the LCBs. As part of good governance, an LCB will be subject to annual audits by an MAS-approved auditor and will need to seek MAS' approval for changes to its substantial shareholders, board of directors and chief executive officer.
Reinforce consumers' rights to access, review and dispute credit records: LCBs will be required to ensure that any consumer who wishes to purchase a copy of his credit report can do so within a specified timeframe from the date of his request. In certain situations where there is a greater need for consumers to access and verify the accuracy of credit reports, such as when a loan application is rejected, the MAS proposes to require LCB members that have approved or rejected a credit application by a consumer, to furnish to that consumer his credit report, free of charge, within a specified period from the date of credit approval or rejection upon the consumer's request.
Transition period for existing credit bureaus
There will be a transition period of six months for existing credit bureaus to comply with the new licensing requirements.
The following materials are available from the MAS website www.mas.gov.sg. Details of the proposed CBA are set out in the draft Credit Bureau Bill found in the annex to the consultation paper.