To ask the Deputy Prime Minister and Minister for Finance what are the conditions imposed by the Monetary Authority of Singapore for the use of personal financial data of customers in the setting up and operation of the Consumer Credit Bureau by the Association of Banks in Singapore.
1 There has been an active public debate on the establishment of the credit bureau1, and particularly on confidentiality. Many Singaporeans are concerned that the credit bureau will lead to a dilution in confidentiality of banking information. They fear2 that commercial banks, with the help of the bureau, will have access to client information about the state of his or her finances that they were not privy to before. These are reasonable concerns and deserve to be addressed squarely.
2 The Banking Act provides the legal framework on the use of customer information. This provision is found in paragraph 7 of Part II of the Sixth Schedule. Banks are only permitted to disclose credit-related information to the recognised credit bureau such as personal details, the type and number of credit facilities granted, repayment trends and bankruptcy records. Banks are not allowed to disclose deposit information. This includes any funds, safe deposit boxes or safe custody arrangements of a customer under management by a bank. This is an important distinction between credit information and deposit information. The credit bureau and other MAS approved institutions participating in the bureau will only have access to a customer's credit history. The purpose for such access is restricted to the assessment of credit-worthiness of customers, and further disclosure to any other person is prohibited.
3 Furthermore, a credit bureau that the banks want to use must demonstrate its ability to address financial privacy concerns competently, and to discharge its role effectively in providing accurate reports. MAS will only recognise and gazette the credit bureau when the concerns are adequately addressed, possibly in the form of a written code of conduct for the bureau.
4 Should a credit bureau fail to maintain the high standards expected of it, MAS will not hesitate to cancel its recognition of the bureau. Once this happens, it becomes illegal for banks to provide customer information to the credit bureau.
5 MAS recognises that the consumer credit bureau has an important role to play in the financial industry. With the establishment of a credit bureau, members will have more information to anticipate potential bad debt situations before they occur. They will be able to better manage their overall level of bad debt3. Studies have also shown that credit bureaus in other countries have enabled credit providers to differentiate between customers, and manage and price them accordingly.
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1 Consumer credit bureaus are not new and have been established in most developed countries for some time; Europe in the '60s, US in the '70s, Hong Kong and Australia in the '80s and '90s. They are generally private sector-led initiatives encompassing both positive and negative information.
2 From 24 May to 21 June 2002, about 1800 queries on the bureau were received after the nine participating retail banks sent out 1.64 million notification letters informing customers about the disclosure of information to the bureau. Only 24 account terminations were recorded after efforts were taken by the banks to explain and assuage concerns.
3 For the first Quarter of 2002, total bad debt written off increased by 59% to $23.9 million compared with the same period in 2001. Comparatively, credit card billings rose 5.6% to $2.8 billion. Total card billings have increased 23.7% since 1999, reaching a high of $11.1 billion in 2001.