Regulating Electronic Credit Information
by Aries Joseph R. Leynes
I. Introduction
In the loan process, one important aspect is the processing of a loan application. Processing starts after the borrower had submitted the client information sheet and the pertinent documents needed for the loan. The “processor” reviews the credit reports and verifies the borrower’s debts and payment histories. If there are unacceptable late payments, collections for judgment, inter alia; a written explanation is required from the borrower. The processor also reviews the appraisal and survey and checks for property issues that may require further discernment.of the procedure in the loan.1
During that process, credit checks and investigations are being conducted to show the credit worthiness and credit standing of the borrower. The purpose of the credit investigation is for these financial institutions to know if the borrower/s is/are capable of paying their loan, debt or obligation because in a contract of loan, a person who receives a loan of money or any fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality.2
In this electronic age, credit investigation evolved and was simplified for the financial institutions. By the click of the computer keys, the credit worthiness and credit standing of the borrower will be projected on the computer screen. These financial institutions depend on the private-sector initiatives such as the Bankers Association of the Philippines Credit Bureau, Inc. (BAP-CB), Credit Information Bureau Inc. (CIBI) and Credit Management Association of the Philippines (CMAP) and the like which maintain credit worthiness records.
The BAP-CB was established initially to facilitate the exchange of credit information among member banks and eventually to provide relevant credit information services for all member banks.3 CIBI is a non-stock, non-profit organization, a creation of the Bangko Sentral ng Pilipinas (Philippine Central Bank), the Securities and Exchange Commission and the Financial Executives Institute of the Philippines and is engaged in the supply of business information and credit services.4 While CMAP non-stock, non-profit entity was conceptualized by some credit men met and discussed the credit problems of their companies who envisioned a need to form an organization, which would promote credit information interchange as well as foster fellowship and camaraderie among creditmen.5
The rationale of the establishment of these private-sectors is attendant to the main objective, to simplify the process of credit investigation utilizing networking among peers and gathered credit information. These private-sectors collated, develop and analyze credit information on individuals, institutions and all types of business.6 And provide an impartial source of credit information for debtors, creditors, the public and its member subscribers.7 The credit information is disseminated electronically through web access by a subscriber for a reasonable fee per inquiry or per entity. The credit information includes such as but not limited to loan exposures and negative checks on the borrowers and property appraisals/valuation and title verifications on the collaterals being offered by the borrowers.
Now comes, Republic Act No. 9510, Credit Information System Act (CISA).
II. Electronically Generated Credit Information
Credit Information refers to information/data regarding the credit standing or credit worthiness of the borrower being accessed and generated electronically through websites and other means of communications. The law provides that “the Corporation shall acquire and use state-of-the-art technology and facilities in its operations to ensure its continuing competence and capability to provide updated negative and positive credit information; to enable the Corporation to relay credit information electronically as well as in writing to those authorized to have access to the credit information system; and to insure accuracy of collected, stored and disseminated credit information. The Corporation shall implement a borrower’s identification system for the purpose of consolidating credit information.”8 As can be realized from the provision of the law, Congress’ intention is that the Credit Information to be by electronics means for easy access and storing like the ones introduced by the private-sector.
III. Kinds of information that can be gathered from a Credit Information
Loan Exposures refer to a credit information exchange among banks, thrift banks and other financing companies that provides credit-dealing reports on individual and corporate borrowers. This will reveal when the lender granted the loan to the borrower, the date of its maturity, the type of loan facilities granted to the borrower, collaterals or securities offered for the loan, over due accounts if any and the remarks of the financial institutions on the borrower.
Negative Checks refer to a credit information system that provides subscribers on borrowers and clients with adverse records, records of credit cards cancelled due to mishandling, current accounts closed by the banks due to improper handling, loans classified as foreclose, litigation and written off accounts and court cases.
Other kinds of Credit Information that may be produced and generated are Property Appraisals/Valuation, which refers to an electronic credit information system that provides subscribers on the fair market values of real estate properties held by banks and financial institutions as loan collaterals and foreclosed/dacioned assets, and Title Verifications, which refers to an electronic credit information system that provides subscribers on spurious, non-existent, or questionable land titles.
