What is a Credit Bureau? A cooperative repository of information Gathers and stores consumer credit payment history from lenders about how individual consumers pay their bills, i.e., credit obligations Provides consumer credit payment history to lenders Assures the privacy and limited use of consumer data

Organizing a Credit Bureau U.S. system is private consumer reporting system Contributes to safety and soundness of banking system Central bank (U.S. Federal Reserve) and other regulatory agencies encourage participation through audit and examination process Fairness to consumer, full file reporting of positive and negative data Any credit reporting agency in an emerging market is better than no organization

Establishing a Credit Bureau… in proper sequence Create and agree on an organizational structure Equal commitment and interest of users and furnishers Confirm and assure that legal structure of state permits development of credit reporting agency Create a communications plan to assure positive cultural acceptance through education and public relations Market commitment to furnish and use data to major banks

Establishing a Credit Bureau… in proper sequence Select a Director or CEO who will manage Credit Reporting Agency Determine adequate site for technological infrastructure (computer hardware, software, communications) Decide if international partner is desired If international partner is desired, send RFP to all candidates

What is the Value of Credit Bureaus to the Lender? Control Risk Lower bad debt loss Risk-based pricing Increase Revenue/Profits Grow the business and increase sales Have more money to lend Administrative Savings Single source of information Standardized decision format Improves Customer Loyalty Speed of approvals Greater number of approvals

What is a Credit Report? Factual and objective history of how consumers pay their debts Credit report contains four sections Identifying information Credit payment history Public record/collection activity Inquiries

Operational Issues of a Credit Bureau Contracts Users Permissible purposes Access code Consumer disclosure Security in-house Penalties for noncompliance Furnishers Frequency of reporting Timeliness of reverification Notification of erroneous data Notification of change in reporting format

Operational Issues of a Credit Bureau Consumer Relations Procedures and staff to handle Inquiries/denials Reinvestigations Complaint resolution Hardware/Software Issues Security Backup systems System capacity and efficiency Ease of upgrading Communication flexibility

Basics of a Fair Credit Reporting Act Defines set of permissible purposes for use of data (privacy) For Credit For Insurance For Employment For Tenant Screening For Governmental license or benefit For Collection Purpose By Court Order By Written instructions of the consumer What is Not Permissible Government curiosity Citizen curiosity Legal procedures (Divorce, Jury Duty, etc.)

Basics of a Fair Credit Reporting Act Consumer access and consumer rights Right to know contents (disclosure) Right to dispute contents Free copy or reasonable fee Demand corrections and reinvestigations Personal statement or explanation Right to sue – civil action for violation Defines obligations of data furnishers Timely and accurate data Reinvestigate disputed data Correct erroneous data

Basics of a Fair Credit Reporting Act Provides for regulation, interpretation and penalties for violation Government agency enforces Government agency interprets Monetary fine and/or jail for violation

Basics of a Fair Credit Reporting Act What a FCRA should NOT do Does not require consumer’s written permission to create or access a file Does not require creditors to furnish data Does not permit consumers to “opt-out” of the system Does not regulate commercial data or information about business credit Is not a substitute for property title verifications Is not a “blacklist” but rather contains positive and negative data Does not allow subjective, hearsay or personal opinion information in the credit report