Credit bureau operator Premier Credit headed by Lennox McLeod has now placed an application with the Bank Of Jamaica (BOJ) to acquire a licence to establish a credit bureau in Jamaica. The company has already had extensive talks with Minister of Finance Audley Shaw following the passing of the Credit Reporting Act 2010.

For years calls to have a workable credit bureau in Jamaica that can help to effectively assess credit worthiness have gone unheeded. Today there appears to be a greater willingness to implement a credit bureau with the regulations which operationalise the new act now approved and gazetted.

From a banking point of view a credit bureau will allow banks to better understand their customers so they can therefore price their loans to reflect the actual risk of an individual rather than having a standard one-size- fits-all interest rate whether a loan applicant is good, bad or indifferent.

Now from a consumer’s point of view it will enable someone who can’t currently get credit to be able to do so because they will now have a one-stop awareness in terms of their financial situation and will be able to monitor the information held about them. Also, consumers will now be able to get a snapshot of all the various lines of credit they may have in one place, the bureau. So in short, a credit bureau in Jamaica means the lender will get a better picture of the consumer and the consumer will now be able to get access to faster more affordable credit that reflects their credit history. The credit bureau will also allow Jamaicans to build their credit history over time. A major reason why interest rates are so high in Jamaica is because lending institutions have to cover their risks and there is no way of affirmatively establishing or assessing risk in Jamaica today. A bureau should play its part in reducing interest rates and making credit more equitable.

The CEO of Premier Credit Lennox McCleod, speaking with Caribbean Business Report from the Terra Nova Hotel in St. Andrew said: “Very often the advantages of risk assessment are stressed – in other words what a credit bureau can do for lenders, and much less about how they serve to help consumers. In reality, for each benefit a bureau brings for large financial institutions, there is a flip side and a benefit to the consumer.”

McCleod has brought in the assistance of Mike Bradford and Helen Lord, two very able and experienced credit bureau specialists who have held senior executive roles at the world’s largest credit bureau Experian. They were both Directors of Regulatory Affairs and Consumer Affairs respectively and now run their very own consultancy firm, Regulatory Strategies Limited.

Bradford, a lawyer and former banker, has developed policies and procedures to ensure Premier Credit conforms with both the letter and spirit of Jamaica’s Credit Reporting Act based on his experiences as former President of the Association of Credit Information Providers (ACCIS) where he held over 40 credit bureaus globally.Compliance will go to the heart of everything Premier Credit stands for to ensure regulator, lender and consumer confidence. The establishment of an effective credit bureau will mean that if Jamaicans can repay their loans, then there will be a profile of the individual and the interest rate charged reflects the credit history of that person.

Addressing security concerns

A pertinent question concerning the establishment of a credit bureau is security fears. How does Premier Credit intend to address these concerns?

“There are significant obligations under the Credit Reporting Act. If a lender is going to share information with the credit bureau they must inform the consumer that they are going to do so and the consumer must agree to that. When the data is held by the credit bureau, one of the things Premier Credit is particularly keen to do, is to build a very secure infrastructure around that data. That data will be housed in secured protocols and the consumer can ask the credit bureau at any time for a copy of the data held on that respective person. The important thing here is to ensure that the data held is accurate and up to date.

“If anything were to go astray either with a lender or consumer, Premier Credit would have an obligation to notify the consumer of what has happened. We have put in place arrangements if this were to occur,” explained Bradford.

Earlier this week, the Bank of Jamaica put out a notice which read: “Bank of Jamaica wishes to advise that under the Credit Reporting Act 2010, the statute which establishes a credit reporting regime in Jamaica, the Bank is designated as the supervisory authority with responsibility to review and make recommendations to the Minister of Finance on applications to operate a credit bureau offering credit reporting services. Persons who are desirous of applying for a licence to establish a credit bureau may now submit applications to the Minister of Finance with copies also submitted to the Bank of Jamaica.”

A macro-economic perspective

McLeod took a broader macro-economic perspective as to what a credit bureau can do for Jamaica, adding: ” The current state of the Jamaican economy is that it is heading in the right direction. What it now needs are different initiatives to stimulate growth such as job creation. One initiative that will help to play a big part in that is to establish a credit bureau. What that means is that consumers will benefit from lower interest rates. If people know they can borrow at cheaper prices, then it will encourage them to borrow. This will help to create more businesses which in turn means more jobs and that spells more tax revenue for the Treasury.

“Also a credit bureau will help to raise Jamaica’s standard on the international financial community. Transparency International which is based in Germany conducts an annual consumer perception index survey. About three years ago Jamaica was 63rd. Today Jamaica is about 96th. PriceWaterhouseCoopers through a company called the Kurtzman Group did a study back in 2000 in order to establish the correlation between corruption and its real cost to an economy. It turns out that for every one point slipped on the Consumer Perception Index, there was a real cost to a country of about US$986 per capita.Now bearing in mind how Jamaica has slipped in the index, then surely it doesn’t make good reading.

Today Jamaica is perceived to have a financial system that lacks transparency and that has to be improved. To the extent that it does improve, one of the knock-on effects would be increased foreign direct investments. We have been canvassing for this bureau for the last four years and it is encouraging to see the Bank of Jamaica now accepting applications for the licence and we have now submitted our application and hope it will be favourably received.”

With so many Jamaicans looking to migrate, a credit bureau will help to establish a credit history here which can be transferable to another domicile. If you leave Jamaica and go to the US or UK with no credit history you in effect start from scratch and likewise vice versa. The portability aspect should help foster better international financial relationships.

Data base

Premier Credit will be aimed specifically at Jamaica and the Caribbean and is comprised of UK expertise. It will be sector agnostic and will target banks, credit unions, building societies, micro financing institutions, the Student Loan Bureau and National Housing Trust. The Credit Reporting Act stipulates that credit information providers can go back as far as seven years for a credit history. In addition to acquiring data from credit information providers ,Premier Credit is hoping to hold the data base of the Electoral Office of Jamaica and also data from the Supreme Court and Resident Magistrates Court. Critical to all this will be the use of the TRN as the key match factor.

Helen Lord pointed out that credit information providers will be able to benefit from the data housed within the PremShare consumer credit bureau and will have access to Premier Credit’s ‘day one’ and developing range of value added services. These include credit scoring, fraud prevention and anti-money laundering tools, authentication checks, collections and recoveries solutions, customer profitability models, training and consultancy.

Her experience shows that heightened consumer awareness is evidenced by the number of people who now opt for credit monitoring services rather than simply requesting a one-off credit report. She says this will be one of the critical offerings in the Jamaican market. She believes that it is imperative that Jamaicans be made aware that having a good credit history is an invaluable asset.

“Why should the vast majority of consumers who are able and willing to repay their loan commitments suffer because of a minority who choose not to do so? There is a fundamental social difference between those who because of a change in circumstances are unable to repay a loan and those who never really intended to repay the loan in the first place,” said Helen Lord.