Explanatory Brief: Credit Bureau Bill 2016
1 The Minister for Trade and Industry (Trade) and Deputy Chairman of the Monetary Authority of Singapore (“MAS”), Mr Lim Hng Kiang, today moved the Credit Bureau Bill 2016 (the “Bill”) for First Reading in Parliament.
2 MAS is introducing a new legislation to enable MAS to license and supervise credit bureaus that collect customer credit information from banks and other financial institutions in Singapore. The objectives are to help ensure the sound operation of licensed credit bureaus (“LCBs”), safeguard the confidentiality, security and integrity of customer credit information, and protect consumer interests. Similar legislations have been introduced in other jurisdictions, such as the United States of America and Australia1.
3 MAS conducted a public consultation on the proposed regulatory framework for credit bureaus and the draft Bill in August 2014 and has incorporated the feedback into the Bill where appropriate.
4 Credit bureaus are entities that collect, use and disclose information relevant to the credit worthiness of borrowers from banks and other financial institutions. Members of credit bureaus are usually lenders, such as banks, that use the information to facilitate their credit assessments and loan approval decisions. The two MAS-recognised credit bureaus are Credit Bureau (Singapore) Pte Ltd and DP Credit Bureau Pte Ltd.
5 As credit bureaus collect increasing amount of data and in more granular details to facilitate more comprehensive credit assessments by their members, it would be prudent to subject credit bureaus to formal supervision by MAS. This will ensure that credit bureaus operate soundly and safeguard the confidentiality, security and integrity of customer credit information. The Bill will also allow consumers the right to access, review and rectify credit records.
KEY PROVISIONS IN THE BILL
Licensing of Credit Bureaus (PART 2)
6 The Bill will establish a licensing framework for MAS to issue, suspend and revoke licenses to carry on consumer and corporate credit reporting business.
7 In addition, the Bill will enable MAS to set admission criteria for LCBs, as well as ongoing requirements for LCBs to continue to be licensed. Such requirements may relate to the sound operation of LCBs and the proper safeguarding of customer credit information.
Duties of Licensed Credit Bureaus (PART 3)
8 The Bill will require LCBs to manage their business and operational risks in a safe and responsible manner. The Bill will specify the circumstances under which LCBs can collect, use and disclose customer credit information. LCBs will be required to safeguard the confidentiality, security and integrity of customer information. LCBs will also be required to provide periodic and ad-hoc information to MAS for monitoring and investigation purposes and notify MAS of certain events such as operational disruptions to their business.
9 The Bill recognises that consumers have a fundamental right to access and review their own credit information and dispute any inaccuracies. The Bill will require LCBs to provide consumers easy access to purchase their credit reports and facilitate the timely correction of erroneous information.
10 The Bill further recognises that consumers may have a greater need to access and verify the accuracy of credit reports issued by LCBs when their loan applications are approved or rejected. The Bill therefore requires LCBs to provide consumers with copies of their credit reports, at no cost, within 30 days of their credit application approval or rejection.
Audit of Licensed Credit Bureaus (PART 4)
11 To enhance the governance and accountability of LCBs, the Bill will require LCBs to be subjected to annual audits by MAS-approved auditors.
Approval of Approved Member (PART 5)
12 To ensure customer credit information are not misused, only approved members may receive such information from LCBs for the purpose of assessing the creditworthiness of their customers.
13 The Bill will empower MAS to approve a financial institution to become an approved member of an LCB. To reduce the administrative burden on existing members of credit bureaus, all existing members of credit bureaus will be deemed to be approved members of the LCBs which they are currently members of.
Duties of Approved Members of Licensed Credit Bureaus (PART 6)
14 The Bill sets out the circumstances under which approved members may request for customer credit information from the LCBs or disclose the information obtained. The Bill requires approved members of LCBs to safeguard the confidentiality, security and integrity of customer credit information obtained from and disclosed to LCBs. The Bill will also require approved members to submit customer credit information to LCBs in a timely manner and facilitate the timely correction of such information.
15 These requirements will help to ensure that the customer credit information provided by LCBs and used by financial institutions for credit assessment purposes is reliable.
Control of Substantial Shareholders, Controllers and Officers of Licensed Credit Bureaus (PART 7)
16 The Bill will provide MAS with powers to approve changes in controlling shareholdings in LCBs. MAS will also be empowered to approve the appointments of the Chief Executive Officers (“CEOs”) and directors of LCBs, and to disqualify or remove CEOs and directors who are no longer fit and proper to discharge their responsibilities.
Inspections and Investigations (PART 8)
17 The Bill will include supervisory powers such as the powers to inspect LCBs and to investigate LCBs and their approved members if there is any suspected breach of regulatory requirements.
Authority’s Control over Licensed Credit Bureaus (Part 9)
18 The Bill empowers MAS to take expedient actions in relation to an LCB under distress situations, to ensure that customer credit information collected by the LCB continues to be safely protected. The Bill allows MAS to appoint a person to advise the LCB on the proper conduct of the operations of the LCB or for MAS to assume control of and carry on the operations of the LCB. The Bill also empowers MAS to require the LCB to cease operation, to petition for the winding up of the LCB, and to require the LCB to take any action as MAS may consider necessary under such circumstances.
19 The Bill further requires an LCB to seek MAS’ approval for key aspects of its operations, including changes in operating rules, credit report format, data specifications and credit scoring methodology.
Offences and Appeals (PARTS 10 and 11)
20 The Bill makes it an offence for an officer of an LCB or approved member if an offence was committed with the consent or connivance of, or neglect by the officer of the LCB or approved member. MAS will also be able to take action against offences such as falsification of records and to compound minor offences. Formal channels of appeal are provided for in the Bill.
Miscellaneous (PART 12)
21 The Bill will provide MAS with other administrative powers, including powers to issue written directions to an LCB on operational, financial, risk management and information technology matters. The Bill will also empower MAS to issue regulations on licensing, collect fees and prescribe corporate governance requirements. To aid the understanding of regulatory expectations, the Bill will also empower MAS to issue codes and guidelines. The Bill will provide a transition period of 6 months for existing credit bureaus to apply for a licence.
1 For instance, the Fair Credit Reporting Act was introduced in the United States of America to subject credit bureaus to regulation and to protect consumer rights. The Australian National Consumer Credit Protection Act was also amended to similar effect.