-
 Private
credit bureaus would complement Vietnam's public registry
because they would maintain and investigate the borrowing
histories of a much broader range of potential customers.
Provided that the would-be borrowers first agree, their detailed
credit histories will enable financial institutions to assess
risk better and determine what interest rates to charge. As
such, private credit bureaus could significantly benefit banks,
borrowers and ultimately, Vietnam's economy.
Banks would benefit because private credit bureaus would warn
them of borrowers who are already heavily in debt and/or have a
poor credit history. This could appreciably reduce banks' risks
in lending and their losses from bad loans. As far as borrowers
are concerned, experience in other countries shows that once
banks begin to trust the services of credit bureaus, they will
give borrowers with good credit history better interest rates,
and even provide loans with less or no collateral.
Mr. Adam Sack,
General Manager of IFC-MPDF
-
 While
private credit bureaus help to increase credit volume and
improve access to credit, they cannot operate successfully
without a strong legal system that oversees the operation of
credit markets as a whole and credit bureaus in particular. This
is why the role of the government is extremely important.
Governments can promote a supportive environment for credit
bureaus by enacting and enforcing laws that ease the sharing of
credit information while also protecting the legal rights of
individuals and businesses.
The relevant laws include bank secrecy regulations, data
protection laws and consumer protection provisions. The two main
concerns that these types of legislation must address with
regard to the collection and distribution of personal data are
in the areas of access and privacy. Both access and confidence
in secure, protected credit information are vital to create
support for credit registry systems. At the same time, through
unnecessarily severe penalties and sanctions or complicated and
expensive procedures, overly restricted information sharing may
discourage firms from entering the credit reporting business.
According to international best practices, the key legislative
elements enabling the operation of private credit bureaus
include: i) allowing not just financial institutions but also
retailers, telecom companies, debt collectors, utility
companies, etc., to report and access credit information; ii)
including both positive (loans outstanding, assets, payment
behavior on accounts in good standing) and negative information
(defaults and arrears); iii) maintaining information on defaults
from the system once debts have been repaid; iv) storing
information for a period of 5-7 years; v) guaranteeing
individuals the right to check their own information and to
report back to the bureau in case of erroneous data; and vi)
ensuring that there is a mechanism in place for correcting
mistaken information in the bureau.
Ms. Nataliya Mylenko, Program Officer,
Global Financial Market Development,
International Finance Corporation
-
 As
a public credit registry, the CIC of Vietnam is already serving
part of the market. However it does not have sufficient human
resources or the technical capacity to deal with a volume
industry like consumer credit. There should be a model that
Vietnam can consider in which the public and private bureaus
work together to serve the whole industry better and each have
roles and functions in financial market development. Malaysia,
where the Bank Negara Malaysia runs the public registry and
where a number of private bureaus actively operate in niche
markets, can serve as an example.
Private credit bureaus change the way banks do business and help
banks improve both operational efficiency and ultimately, their
bottom line. In the U.K. or U.S., lenders no longer tend to
collect information from the borrower's application; certainly
there is not much information that they can get only from the
application. For example, lenders can make credit decisions in
three seconds based purely on customer names and their postal
codes. This is because credit bureaus hold all the information
that banks need for such decisions. The banks can be confident
that such data is secure (obtained in accordance with consumer
privacy laws), accurate (not easily changed by other parties),
and reliable (available on a consistent basis). However, credit
bureaus operate on the principle of reciprocity, which means
that in return for these benefits, banks must commit to
providing them with accurate information. Ultimately, the
quality and quantity of information supplied determines the
quality and quantity of information received, so both sides have
a vested interest in ensuring that the other has access to
correct data.
When establishing private credit bureaus in Vietnam, there needs
to be careful consideration not only of the legal framework
required to enable credit bureau operations and effectively to
protect consumer privacy, but also of the issue of the credit
bureaus' ownership and structure. A consortium model may be
appropriate for Vietnam's context. This is a model in which a
number of different parties can participate in bureaus,
including the most important stakeholders: i) local providers
who can serve market demand on the ground; ii) technical
partners such as one of the leading international credit bureaus
who not only bring in technology solutions required by the
bureau but also have experience in setting up, operating,
managing and promoting credit bureaus; and iii) lenders, who
include banks as well as other subscribers such as credit card
companies, insurance companies, etc.
Mr. Tony Lythgoe, Credit Bureau and Risk Management Advisor,
International Finance Corporation
* All viewpoints are from the
workshop “Development of Private Credit Bureaus in Vietnam”
which was co-organized by the State Bank of Vietnam, IFC-MPDF
and Visa International in Hanoi, January 2006.
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