| BRAZIL – A law on collection of positive debt data is being rushed without due time and discussion. Member of the global coalition for responsible credit, Brasilcon, reminds us that there is a broad discussion taking place on whether allowing positive information and making inquiry into a database before granting a credit should be obligatory as it is now the case for the European Union after Directive 48/2008/EC. |
The arguments to let positive data enter are more negative ones since allowing only negative data the picture will get wrong. A customer who defaults in a small credit will have this information available while the fact that he serviced a big loan for years without problems may not be considered. This is certainly a big disadvantage. On the other hand removing all barriers to data collection requires high responsibility. In so far, many argue that such schemes can only be allowed if they are run by state agencies like in France and Belgium or if at least there is a very narrow state supervision on the collection and use of such data. If not, such data will be used in the whole of the economy and create social discrimination to those who have little positive data in the past. It becomes a self-fulfilling prophecy if those who are young or who had problems in the past are excluded from access to homes, credit etc.
The basic problem of credit history is that it goes against the true vocation of a bank to evaluate the chances of a future investment and share the risk for it with the consumer. A consumer, who builds up his or her family, needs capital to build up income. The bank should help and not tell them that they first have to prove that they have succeeded elsewhere before they get a credit. This is especially true for small business loans. An Equal Credit Opportunity Act should therefore accompany this kind of credit reference agencies.
Scoring makes the whole system very dangerous and problematic. Scoring reduces consumers to numbers. They create a value allocated to a consumer which may be attached to his or her future. Scores often contain very old and outdated information since they refer to older scores etc. In addition a score is arbitrary. It leaves no discretion to the concrete lender and his opinion about the envisaged investment. It turns lending into an automatic senseless mechanism and is comparable to inflation rate indices which create inflation instead of coping with it.
Scores should be totally transparent, objectable and controlled and should always be only one means of evaluating creditworthiness.
Brazilian Parliament should take some time and ask for the enormous experience in this area available for example in the CRC-Network. For us responsible credit is a credit which is productive in the future. It is not a credit denied to people with moderate means on account of their credit history.
See a copy of the proposed law in Portuguese below and an electronic translation of one part of the text below:
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Dear friend and associates of Brasilcon,
As the press has reported, the House of Representatives may at any time, vote the PL 836/2003 discipline that the "register positive."
Although this proposition is dealt for some time, will be presented for vote at the plenary of replacement Amendment (doc. attached), which contains provisions against consumers' interests, such as waiver of notice of protest when there is debt, the not applying the rules to public data banks, the lack of reference to "informed consent" for treatment of positive information,
Fact is that there was no time for discussion of the amendment substitutes.
It is suggested that members and stakeholders to participate in this important debate forward to the Chamber of Deputies a message requesting that the PL 836/2003 is not voted at this time, waiting a minimum of 30 days to maturity and greater discussion of the matter with its new writing.
The best way to contact is forward e. mail to Members. For this, simply access the site's House (www.câmara.gov.br) and the contact link (above on the right side of the main page) ask, request the postponement of the vote of PL 836/2003. It is important that the request message requesting the postponement is referred to all Members.
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Extract:
It is now possible to databases for analysis of risk based on their registered files. Risk analysis (known internationally as credit scoring) is to evaluate a potential borrower credit based on your payment history, compared with the average standard of adimplência occurred in the economy.
The development of statistical and econometric models can assign different weights to certain characteristics of the borrower credit, analyzing their potential. To bring greater transparency to this process, requires that the databases that carry out risk analysis should make public the information considered in the employment of its techniques and scoring systems. In addition, it prohibits the transfer of risk analysis between member databases, in order to preserve the objectivity of their records.
Failure to comply with the requirements expressed in the text subject violators to penalties under the Consumer Protection Code when ratio of consumption between the parties. In this case, the competence for supervision and monitoring of this sector will be undertaken by the organs of defense and consumer protection.
It is therefore proposed that has great social and economic importance to the country In summary, the amendment has the following purpose:
- Regulating the activity of Database Protection in the Credit.
- Allow the collection of positive information - currently only permitted to collect information of default (negative), ie there are only "negative entries.
- Allow the analysis of information ( "rating") - Currently, the information in the databases must be "objective." The customer is not delinquent.
In turn, the importance of Positive Registration can also be synthesized through the following:
- Facilitate access to credit for lower income groups and for micro and small enterprises, sectors that typically do not have sufficient equity or assets to be offered as collateral in credit operations. The history is not composed only of credit operations. Often, the history begins with the payment of the account of public services such as water, electricity and telephone. So enjoy these segments;
- With the permission for the inclusion of positive information and its analysis, default point in a set of positive information, they tend to lose importance. Currently, if the person forgets to pay a telephone account of $ 10, it is "negative", even that has an excellent credit history.
- Minimize the perverse effect of the asymmetry of information "that assimilates the good and bad payers. Register with the positive, good history with creditors tend to have more credit, the lower cost and longer.
- Increase the turnover of the economy, because the parties will know the counter-parties.
- Reduces the risk of default, and the effects on the economy.
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| ID: |
42496 |
| Author(s): |
ECRC |
| Publication date: |
04/03/09 |
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Created: 05/03/09. Last changed: 05/03/09.
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