The Credit Reporting Act, 2017 (the “Credit Reporting Act”), renders anyone who sends inaccurate, incomplete, misleading and false information to a credit bureau or bureaux liable to a fine and, damages in Nigeria.
Objectives of the Credit Reporting Act include to:
- Facilitate and promote access to credit as well as to enhance risk management in credit transactions;
- promote access to accurate, fair and reliable credit information and to protect privacy of credit information;
- promote fair and competitive credit reporting system;
- promote responsibility in credit market by encouraging responsible borrowing, avoidance of over-indebtedness and fulfilment of financial obligations by consumers and discouraging reckless credit granting by credit providers and contractual default by consumers; and
- facilitate credit information sharing.
Nigeria’s Credit Reporting Act incorporated Central bank of Nigeria’s (“CBN”) Guideline for the Licensing, Operations and Regulation of Credit Bureaux and Credit Bureau related Transactions in Nigeria, 2013”, (the “Credit Bureau Guideline”), to the extent that the Credit Bureau Guideline will be read to conform with the provisions or objectives of the Credit Reporting Act.
Lack of clearer credit information imparted negatively on the competitiveness of Nigeria’s credit reporting system and administration of credit before year 2017. The Credit Reporting Act, widened the doorways of every stakeholders’ duties and rights.
Credit information means “information bearing on a person’s credit worthiness, credit standing or capacity, and to the history and profile of
such person with regard to credit, assets and any financial obligations, including such person’s demographic data and such other information that
may aid credit decision-making”.
A Credit Information Provider is an entity that provides credit information to a credit bureau and includes banks and other financial institutions regulated by CBN; leasing companies; insurance companies; co-operative societies or institutions that offer credit to medium, small and micro enterprises; utility companies such as electricity distributing companies; asset management companies; credit reporting management system (CRMS); anyone who supplies goods or services on a post-paid, deferred or instalment payment basis; and landlords or real estate companies.
CREDIT REPORTING FRAMEWORK
Functions of credit bureaux include to operate and manage credit data register that is generally electronic. A service level agreement usually entered into between a credit bureau and credit information provider allow credit information provider access to credit reports.
Whenever changes occur in respect of any customer’s credit information, a credit information provider must promptly update any such credit information otherwise it may be liable to the customer to the extent of losses suffered therefrom.
Generally, customers’ credit information on a credit bureau or register will, if an individual, include name, nationality, image, date and place of birth, identification documents, present and past addresses in the last three years, profession, details of present and past jobs in the past three years, spouse’s name in addition to any other data that meet the requirements of the credit bureau.
For a legal (artificial) person, its credit information will include name, legal status, shareholding structure of 10% and above of the paid-up capital, company registration certificate and any other information that meet the requirements of the credit bureau. Perhaps tax status should be included as well.
Whether a natural or artificial person, credit information may disclose loan value and, authorized credit limit, outstanding balances, type of facility or product, maturity date, outstanding instalments due and types of collateral offered in addition to any other information that meet the requirements of the credit bureau.
Payment habits will include both positive and negative information. Where applicable, historical data for a minimum of five preceding years, that reflect extent of customer’s regularity in fulfilling credit obligations.
A Credit Bureau must maintain a historical database covering a 6-year period from the date a credit information provider last disclosed the credit information, and shall remain on the database for a period of not less than 10 years after which it shall be archived.
CREDIT REPORTING OBLIGATIONS
Financial institutions and other credit information providers, generally, include a credit reporting and search obligations in transaction documents.
We are not aware that LAWMA (Lagos state waste management authority), Ikeja electric (Ikeja electricity distribution company), or Eko electric (Eko electricity distribution company) include a credit and search obligation either on its website or bills or customer recruitment documents.
Without a written consent from a customer, a credit search or credit information sharing will amount to a breach of Constitutionally guaranteed right to privacy unless such disclosure is based on the order of a competent court or criminal investigations or prosecutions.
Credit information provider or any other users must report accurate and complete credit information. It is an offense under the Credit Reporting Act for a credit information provider or user to intentionally or negligently provide or report inaccurate, incomplete, misleading or false information to Credit Bureaux, or a customer.
A credit information provider or user shall not tamper or alter credit information received in such a manner as to incorrectly represent a credit information or to obtain credit information from a credit bureau under false pretence or for a purpose other than a permissible purpose.
Credit information providers’ failure to submit or update credit information within the time frame stipulated under the Credit Reporting Act or within such other time frame specified by CBN commits an offence.
LIABILITIES AND FINES FOR INACCURATE AND FALSE CREDIT INFORMATION
A credit information provider and a credit bureau are each (and may be jointly) liable to a fine of 10 million Naira for intentionally or negligently providing or disclosing inaccurate, incomplete, misleading or false credit information (the “fine”).
Fine applies to any alteration or tampering of credit information received in such a manner as to incorrectly represent any credit information or to credit information intentionally or wilfully obtained from a credit bureau under false pretence or for any use other than a permissible purpose.
A customer who has suffered tangible or intangible losses as a result of credit information being inaccurate, incomplete, misleading and false will naturally be entitled to special and general damages under Nigerian law. Whether under the Credit Reporting Act or in tort of negligence.
Losses that may arise from breach of credit reporting obligations include denial of access to micro-credits or other financial or non-financial services on grounds of credit unworthiness or reduced credit worthiness.
We hold the view that a court of law or an arbitrator should be urged to take into account the severity of the fine above in awarding general damages against any credit bureaux or credit information providers.
The Credit Bureau Guideline subjects any dispute arising from and relating to credit bureau transactions to arbitration and conciliation Act, laws of federation, 2004,
While Credit Reporting Act, allows anyone whose rights is breached to approach a court upon a credit information provider’s failure to address a complaint, subject to an appeal to CBN’s customer protection department.
Given that the Credit Reporting Act insists that the Credit Bureau Guideline should be read to conform to itself, to our mind, the Credit Bureau Guideline’s requirement on arbitration should be construed as an alternative and, not abolished.
From the foregoing it is our clear view that a credit information provider is liable to a customer for any losses arising from or relating to inaccurate, incorrect, misleading and false information as disclosed or reported.
– We are not certain if a judicial body would be inclined to construe “inaccurate, incorrect, misleading and false” credit information as conjunctive or disjunctive.
In any case, wrongful credit information, necessarily, affect customer’s credit worthiness, credit standing and capacity to access credit or services from other service providers.
In our view, Nigeria’s credit reporting system is gravely under-utilized. Our credit reporting management system should more conscientiously ensure that more stakeholders are enabled to provide credit information to credit bureau.
CBN’s effort will be duly rewarded given that public officeholders, political aspirants and every other Nigeria that may include employers of labour will become more conscious of their credit worthiness or suitability.
Indeed, the objective fruits of Credit Reporting Act is yet to be reaped across Nigeria.
Written by our Osita Enwe