2 weeks ago
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The Fair Trading Commission, FTC, is projecting $54 million in savings for consumers over three years, if the credit bureau sector were to set a central sharing system.
Such a system, it said, “would stimulate competition and efficiencies in the market for credit reporting”.
Consumers are allowed one free credit report per year. For additional reports, the bureaus charge a base price of $1,150 per request.
The savings to consumers, FTC added, would largely come from increased efficiencies, the avoidance of generating additional reports, and the opportunities created for new entrants to the market.
Three credit bureaus hold licences to operate in Jamaica, but not all three receive credit information from the over 122 credit information sources. The FTC aims to “mandate universal data-exchange contracts” to ensure that all credit bureaus have equal access to credit information.
“Policymakers should mandate that any provider that pulls information from any credit bureau should be required to submit data to all credit bureaus,” said the competition watchdog. “A centralised credit information-sharing system is crucial to expanding the market for credit services.”
In 2023, the three credit bureaus issued approximately 450,800 credit reports. Since the pandemic, complaints have grown from beyond 1.0 per cent per year of total reports, hitting 1.3 per cent in 2023. That’s coming from a low of 0.3 per cent in 2017.
Consumers seeking loans consent to lending institutions conducting credit checks through the bureaus. In 2013, Creditinfo Jamaica Limited and CRIF NM Credit Assure Limited launched the first full-fledged credit bureaus, followed by Credit Information Services Limited in 2014. The Credit Reporting Act of 2010 established the legal framework for credit bureaus in Jamaica, with the Bank of Jamaica acting as the regulatory authority.
Commercial bank loans now total $1.34 trillion, half of which are consumer loans totalling $675 billion.
The FTC’s report also revealed that credit bureaus occasionally underperform in terms of data accuracy, timely reporting, and transparency. But, for credit markets to function effectively, lenders must have reliable information to assess the creditworthiness of potential borrowers, the FTC noted.
“The absence of reliable information perpetuates information asymmetry, which may lead to market failure due to adverse selection and moral hazard issues that undermine market efficiency and stability,” its report stated.
A centralised information-sharing system would benefit both borrowers and lenders, according to the FTC. Increased data availability can reduce risk for lenders, which in turn can increase loan demand from borrowers.
“On the demand side, lower interest rates resulting from the lender’s access to reliable credit information expand access for potential borrowers who would have been otherwise excluded from credit services. By accurately assessing risk and adjusting interest rates accordingly, lenders can attract a broader range of borrowers. A system that facilitates reliable information sharing potentially promotes financial inclusion by expanding access to the economic system,” the fair trade regulator noted.
Additionally, the FTC has called for greater competition within the credit bureau industry, encouraging new players to enter the market and provide more affordable, efficient services. The commission believes this will create a more consumer-friendly environment, offering fairer credit terms and lower borrowing costs.
Discussions are currently under way to amend the Credit Reporting Act to require a 14-day resolution period for some matters, according to sources in the sector, including what is said to be one of the most complained-about issues — paid-off loans.
The law currently stipulates that the credit bureau must initiate discussions with the lender over the disputed information within 14 days of a complaint being filed, but is silent on the resolution period.
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