This summer, Russia has seen several amendments to its Federal Law ‘On Credit Histories’ (the CHL). The amendments come into effect on different dates and aim at compiling credit histories regardless of the consent of their subjects, elaborating the contents of credit histories and facilitating access to them and introducing some other changes. A number of other aspects of compiling credit histories are also affected.
New Subjects of Credit Histories
According to the current wording of the CHL, credit histories are only compiled in respect of individuals and legal entities acting as borrowers under loan or credit agreements . Starting from 1 March 2015, sureties and bank guarantee principals (persons who applied for bank guarantees) will also become subjects of the credit histories. Surprisingly, the Russian legislator has amended the definition of the term ‘credit history subject’ by extending it to persons in whose favour the court awarded unpaid amounts of residential payments, public utility and communication charges or alimony. The information about such debt may be passed to credit history bureaus if the relevant court decisions have not been executed within a 10-day period by the persons against whom the decisions were rendered. In practice, credit histories should be compiled with regard to debtors against whom (and not in whose favour) the award was issued as is evident from other amended provisions of the CHL.
Compiling Credit Histories Without Consent of Their Subjects
For almost ten years, Russian credit institutions were providing information to credit history bureaus only subject to the consent of the respective borrowers. Beginning from 1 July 2014, credit institutions, microlenders and credit cooperatives must submit information on all borrowers without their consent to at least one bureau included in the special state register, and the borrowers are very unlikely to oppose such submissions. The same information disclosure rules shall apply to sureties and bank guarantee principals from 1 March 2015. This is intended to allow potential lenders to pierce the veil of credit history secrecy and allow them to reliably check the status and the history of extinguishing financial obligations by any individual or company with respect to the lending organisations listed above.
Beginning from 1 March 2015, other legal entities that are lenders under loan agreements shall be entitled to send, at their sole discretion and without consent from the subjects of credit histories, credit information on their borrowers and sureties to a credit histories bureau included in the state register. The awardees of unpaid residential rental payments, public utility and communication charges or alimony as well as the bailiff service will be entitled to do the same with respect to debtors who fail to execute court decisions rendered against them for more than 10 days. If these creditors choose to exercise their right, they will also be obliged to provide the bureau with the information on the debt payments.
New Records in Credit Histories
Currently, credit histories of companies and individuals (debtors) consist of three parts:
- the title part which contains the subject’s general ID information, i.e. full name, date and place of birth, passport details, tax and insurance numbers for individuals and full company name, registered address, information on reorganisations, unified state registration and tax numbers for legal entities;
- the main part providing for certain additional information on the credit history subject (place of residence and individual entrepreneur registration details for individuals and, as applicable, bankruptcy and reorganisation data for legal entities) and details of its financial obligations (debt amounts, due dates and interest dates, payments made, security for the obligations, disputes, etc.); and
- the additional (closed) part comprising of ID details of the sources of credit records (e.g. banks and microlenders) and persons who have access to the credit history (users of the credit history).
On 1 March 2015, a set of amendments will come into force to determine the contents of credit histories of sureties, bank guarantee principals and debtors of alimony, utility, communications and rental payments and to further detail contents of records of debtors in loan (credit) related relations (e.g. prescribe recording of assignments of creditor rights). In addition, a new (informational) part shall be introduced to become a part of credit histories of private individuals. Under art. 4 of the CHL, this part must provide for general information on the provision of a loan or a credit to a credit history subject, or a creditor’s refusal to do so including the reasons for the refusal. The informational part will record failures to pay two or more successive payments under a loan or credit contract within 120 days from the due date.
Access to Credit Histories
Up to 1 July 2014, credit reports were available only to some public bodies (e.g. courts, the bailiff service), subjects of relevant credit histories or potential creditors (legal entities and individual entrepreneurs). The latter could obtain a report for the sole purpose of granting a loan or credit and provided that the credit history subject gave consent to do so. In practice, this rule excluded credit information from the scope of legal screening investigations, which are commonly performed in respect of job applicants, top-managers and new business partners. Currently, the credit history subject’s consent can be given to any legal entities and individual entrepreneurs for whatever purposes. The consent specifying the purpose, name of the credit history user and the date of issuance can be granted in writing or by ‘any other documentary means’. The amendments to the CHL entering into force on 1 March 2015 shall only allow consent to be received in writing (the signatory will be obliged to show his/her passport or other ID document to the consent recipient) or in electronic form certified with digital signature. Despite a certain facilitation of the access rules, the additional (closed) part of a credit history shall remain available only to the credit history subject and, in certain cases, to courts, preliminary investigation bodies and, starting from 1 March 2015, to the Central Bank of Russia and notaries conducting probate cases.
When credit history bureaus form informational parts of individuals’ credit histories, any legal entity or individual entrepreneurs will have the right to access them without the subject’s consent in order to provide a loan or a credit to such subject. As under Russian law, lenders are under no obligation to grant loans (credit), this new rule is very likely to be extensively used for screening and background checking of credit history subjects. It is possible that collecting the informational parts of credit histories without the intention to give a loan (credit) may be considered as illegal access to credit histories, and could lead to administrative penalties (fines for legal entities and/or their responsible officers or temporary disqualification of these officers from office). As such, doing so will require a more elaborate and sophisticated approach.
Credit reports can be received only under an information services contract concluded between a credit history user and a credit histories bureau.
The latest amendments to the CHL touch upon many other issues of handling credit histories. At first glance, Russia is taking a significant step towards ensuring openness and trustworthiness of the parties in lending relations. It is now safe to assume that credit history rules will now be subject to continuous reform.