Credit bureau will reduce borrower default — SLB head

BY ALICIA DUNKLEY Senior staff reporter dunkleya@jamaicaobserver.com

Thursday, September 01, 2011

EXECUTIVE director of the Student's Loan Bureau Monica Brown says the operation of credit bureaus, at least one of which should be up and running by year end, will further reduce the struggle of that entity with high borrower default.

"We are certainly looking forward to the commencement of the operations of the Credit Bureau because this we feel will go a long way in assisting with an increase in our collection and a reduction in delinquency," Brown told the Observer in a recent interview.

The Credit Reporting Act, passed on August 31 last year ,took effect that October. A credit bureau collects information on borrowers, which is then entered into credit reports and the information offered to lenders, insurance companies and employers. The Act has, among other things, legalised the sharing of credit information between specified financial institutions, enabling creditors to make better lending decisions.

Noting that the Bank of Jamaica (BOJ) — which is the regulator — is now in the process of assessing applications for potential bureau operators, Brown said "as soon as the Credit Bureaus come on board then the SLB will be obliged, under law, to provide information to them based on arrangements to be made with them on SLB beneficiaries and in particular the delinquent beneficiaries".

"That we feel will provide some incentive for persons to pay their students loan, so that should help in dealing with the collection and with the delinquency problem.

So, for example, a Student's Loan beneficiary who has not repaid, the information will be fed into the bureaus and they will use it in assessing the rating that will be assigned to the individual," she explained.

This rating, the SLB Director outlined, would affect the way borrowers do business.

"... For example, if the individual wants a loan from a bank to buy a car or a house the bank is going to look at the person's credit history and rating and this will be factored into whether they lend the person and the interest rate," she noted.

"So it is very important that beneficiaries of student's loans who have outstanding loans settle so that the information provided by us to the Bureaus will enable them to get a positive rating so that they can do business with ease," Brown continued.

The SLB director said to the extent that the entity is able to collect on the loans it has disbursed the need for external funding would be reduced.

"Because it is a revolving fund that we operate and therefore heavy reliance is placed on the payment flows to be able to grant further loans. So once we get persons to start repaying more or at a higher rate there will be more funds available to grant loans. Therefore, we don't need to go out and borrow because lately we have been relying on borrowed funds to supplement the reflows from repayment in order to grant loans," she told the Observer.

According to Brown, this level of borrowing can "be problematic if you borrow funds to grant loans to students and these students do not repay".

"We are going to be in a conundrum, because we have a loan to service, we have to honour our debt. We really would hope that the collections improve so that there is less dependence on borrowed funds," she added.

In the meantime, she said persons have been taking advantage of the amnesty — which it extended in March this year — with some 600 persons already making payments.

"We have collected probably a little over $80 million so far. Whilst I was hoping the response would have been greater, I am still pleased so many persons have responded and have really settled their accounts and have brought them current," Brown said.

Banks, building societies, the BOJ, financial institutions licensed under the Financial Institutions Act, the National Housing Trust, the Development Bank of Jamaica and the SLB are among institutions that will be able to supply credit information on borrowers to the credit bureau. Local creditors will be privy to a credit history of potential borrowers from the bureau to be established under the Act.

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COMMENTS (13)

Jakan 2011
9/1/2011

@ Garnete M, That's where you and I are different. I don't care what interest rate another person pays. I hear caucasians here grumble about other people getting a good deal. So what! I should go find the best deal for me. Loans are usually secured so if they don't repay take their collateral. What do I get or lose because someone else gets interest rate that has nothing to do with me? The time I'd take minding his business, I'd mind mine, the energy to begrudge him I'd use to better myself.

British Deportee
9/1/2011

Jakan, give it a chance nuh man! If vision 2030 is to be realized, this is 1 of the dicey issues that we have to develop tolerance for. We can't have it both ways; developed countries are notorious for their inquisitive behaviours, & that's why so many of us are being deported annually. On the other hand, lesser developed societies often promote the 'infama fi dead' culture, & ultimately deprive their security forces of a cohesive citizen/police relationship. CB doesn't really hurt honest ppl.

Ashlee Turner
9/1/2011

In my humble opinion-Jamaicans who will not support a Credit Bureau are those who want to ,and continues to take loans from one institution to the next,without paying. I do NOT believe that the sharing of information will be of any concern as some of us will give ANY and EVERY information to access a visa to to go to the USA. Also we the poor who cannot find house and land to access a loan will now be able to show Jamaica that we are a set of honest people.

Garnete McDuffie
9/1/2011

All, I have made some erros in trying to do too many things at once.
Correction:
!) Consent and NOT "concent"
2) an education, and NOT "and education"
Sprry for the inconvenience.

Garnete McDuffie
9/1/2011

K Davis, the very people you are claiming have no discipline, show a lot of it when they are overseas! It is obvious that the government and other stakeholders will have to do a lot of work to enlighten the Jamaican public of the benefits of credit bureaus. If you are a honest and honourable borrower, then the credit bureau will definitely work in your favour. Imagine you being a discipline borrower, and your neighbour the opposite, then you both pay the same rate of interest on your loans!

Jakan 2011
9/1/2011

@Garnete, Jamaica already has TRN (pretty much Social S #) that can be used to hold borrowers to their agreement. Credit bureau (CB) is not good and it definitely does not reduce borrower default. Once I had a disputed bill with a cell phone co and teach me a lesson the Co reported me to CB when the law says a disputed bill cannot be reported. When I found out and talked to the CB they said they can do nothing about it and all they do is collect the reports and report them including to others

Jakan 2011
9/1/2011

@ Garnete M, in a perfect world that would be good BUT take it from me, farrin has all those Acts and Rules but no one obeys them in farrin let alone Jamaica and govt changes law at any time. They will start with can't give info to so and so now but watch if that won't change over time. I could tell you stories including credit bureau info being used legally and illegally to prevent people getting hired. I worked in HR and was shocked! I believe credit bureau will be used to abuse people . . .

K Davis
9/1/2011

no man Garnete, the ppl dem nah go like it cause now u wont be able to jus lef a loan here and stop pay off there and jus run next door and write up a next form at another institution or shop, swearing blind that ur income and expenses allow u to undertake said loan. i guess if it means discipline and order, we nuh inna dat

Garnete McDuffie
9/1/2011

Jakan, there are some things that we as J'cans will have to get from "farrin," as we simply do not have them in Jamaica. Unfortunately, the successful operation of the credit bureaus will need help from "farrin". You should also bear in mind that credit bureaus do NOT make any decision for the lenders - they simple supply financial information, and the lenders can use the same to make decisions as to whether or not to lend money. Overall, credit bureau will be very good for consumers and lenders

Garnete McDuffie
9/1/2011

Also, Jakan 2011, I suggest when you get some time, you read the Credit Reporting Act 2010 for yourself. For eg, no employers can obtain an employee or prospective employee credit file without the expressed written concent of that individual - such act is illegal under the CRA! I support the sharinng of credit information among lenders, as it helps lenders make better lending decisions.The practice of one rate for all is worse than sharing credit information for lower interest rates. Do u agree?

Garnete McDuffie
9/1/2011

Jakan 2011, I do not understand your comments. When a lender lends money to a borrower, he/she has an obligation to repay the lender, so that the money repaid can be loaned to other borrowers. Where there the borrow either refuses or is unable to make repayments as and when they fall due, then it will most like to upset the lender, as it can and will over time affect the lender's cash flow.It is inconceivable that the SLB can lend money to anyone to get and education, and that person doesn's pay

Deanna W
9/1/2011

still cannot see why this info would be given to employers, unless it is a financial institution. I still think education should be free and the country should post a restriction on you migrating for a period of time.....give back to the country what they gave to you.

Jakan 2011
9/1/2011

Wake up woman, nutten nuh go so. Is not everything good fi farrin good fi Jamaica. Also, for what reason will credit information go to employers? So if you are out of work and go into arrears with any loan or other credit matter, dawg nyam yu supper for you also become unemployable or at least less employable so how yu ago get back on track fi repay? Sounds like credit bureau will definitely put lenders into bankruptsy faster that ever. Watch how all a unu gwine bawl. NO US/farrin bureau owner

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Credit bureau will reduce borrower default — SLB head