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Responsible Lending and Borrowing: The Role of the Consumer Credit Information Industry

The Association of Consumer Credit Information Suppliers (ACCIS) devoted its entire annual conference (June 2011) to the topic of Responsible Lending and Borrowing: The Role of the Consumer Credit Information Industry.   Association members discussed intensively the need to work with consumers (data subjects) and regulators to create greater awareness of the role of the consumer credit bureau industry in the lending process.   Based on numerous presentations by members it is evident that the industry has fully embraced the concept of consumer education:   Many credit bureaus have launched programs on financial literacy to avoid over-indebtedness.  In many countries financial literacy courses are now part of elementary education.

One interesting example came from the German Credit Bureau Schufa.   Using the metaphor “Schufa macht Schule” meaning “Schufa provides aspirations” the company launched a web-based program directed at young people and the teaching profession providing relevant information on financial literacy, prevention of over-indebtedness and the role of Schufa in the German economy.  The response from the teaching profession in particular was overwhelming, said Dr. Freytag, the CEO of Schufa.  He also stated that regulators responded positively to this initiative.  Dr. Freytag added:  “We (the industry) must treat regulators as partners, not as enemies.”

The IFC (International Finance Corporation – World Bank Group) sent Tony Lythgoe to provide an overview of the current work of the IFC:  The IFC has been very active in creating a broader public awareness of credit reporting and to work on global standards.  He stated that the paradigm was shifting from a financial services only perspective to a systems point of perspective, embracing the concepts of full file reporting, financial inclusion of consumers, micro and SME businesses, and the prevention of over-indebtedness and promoting responsible lending.

The business of credit bureaus has existed for decades and more credit bureaus are being launched in emerging markets.  Nevertheless, credit bureaus primarily served the financial services sector with the objective to prevent bad debt.  In essence the benefits flowing only to the financial services sector. 

Little attention was given to the consumer (data subject) until relatively recently when data subjects in South Africa rebelled.  Out of ignorance many consumers believed that a credit bureau was a black list with the purpose of preventing black people to gain access to financial services.  As a consequence the credit bureau industry in South Africa now faces a rather harsh regulatory regime, however the positive outcome was the introduction of consumer education in financial literacy starting at the elementary school level.  At the same time the credit bureau industry became engaged in creating greater awareness of the role of information services in the financial services sector.   

This concept of transparency and consumer awareness is now being universally adopted by the credit bureau industry as evidenced by the intensive discussion at the recent ACCIS conference.

Source:  BIIA at the ACCIS Annual Meeting

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