Wednesday, 11 December 2013
Credit Reporting Bill 2012: Second Stage
I welcome the Minister and thank him for his explanation of the Bill. I conducted some research on the subject and was surprised to find that we were way behind other countries in this area. Many other countries already have a system like this in operation. I hope it will be one tool that will prevent reckless lending in the future.
We should look at the Bill from the perspective of the consumer or business. How can consumers or businesses build a good credit rating, not just in terms of their dealings with banks? In some countries the credit register takes into account an individual's or a business's dealings with retailers, trade creditors and utility companies, as well as their dealings with regular financial institutions. I know from my experience in business that some suppliers or retailers were totally reliable and trustworthy, but they could have had a bad credit rating because they had missed a payment some years earlier. If they wanted to expand their business, a bank could refuse them a loan, in spite of the fact that I, as a bigger retailer, knew how reliable they were. On top of this, even today I am aware of businesses that do not have traditional relationships with banks. Could we include a provision in the Bill in order that retailers, trade creditors and utility providers could feed into the register? In doing so, we would be emphasising the good in individuals or businesses instead of focusing purely on the negative, with the register being used to justify a refusal of credit, based on the data therein. My idea would, in theory, see a business that would generally be refused a loan because of its credit history actually being offered a loan because I, as a retailer, had fed so much good information on it into the system. Surely such day-to-day dealings are as reliable, if not more so, than some loan repayment information. The World Bank supports this practice and argues that sharing information on reliable repayments allows customers to establish a positive credit history and improves the ability of lenders to distinguish between good and bad borrowers.
In Spain it is the practice to distribute credit information from retailers, trade creditors and public utility providers, as well as from financial institutions. Could we learn from this best practice? Could we get utility providers, retailers and trade creditors to electronically report on good payment practices by their customers? It is also worth noting that in Panama a law allows entrepreneurs and SMEs to request the addition of information on utility payments to their files, helping them to build a good credit history to improve their chances of securing credit. If the Minister is not open to getting retailers or utility providers to report on a customer, could he, at least, allow SMEs to request additional information on utility payments to be added to their files? That would be a small first step which could make a difference to the very survival of a business. In a recent report the World Bank cited an example of a utility company in the United States, DTE Energy, an electricity and natural gas supplier, which began full reporting of customer payment data to credit bureaux. DTE Energy customers with no prior credit history - approximately 8.1% of its customer base - gained either a credit file or a credit score. Customers began to make payments to DTE Energy a priority and within six months the company had 80,000 fewer accounts in arrears, which is very significant. This would be a pro-business measure and I ask the Minister to indicate whether he would be open to the idea. Spain has undertaken this measure, with 57 other countries. We could learn a lot from them.
The Bill allows people to access their credit history data, but could we allow SMEs to insert explanations or complaints about negative instances in their credit history reports? Their side of the story must be heard. It is not always about figures; there are people behind the numbers. Panama allows this to happen and it would be a good addition to the Bill which would help to balance it out.
I welcome the Bill and the effort that has been put into it. I was rather surprised to find that Ireland was one of a number of countries that did not have something like this up and running. It is welcome that we are developing this system now and I echo Senator Darragh O'Brien's question as to when it is likely to come into operation. Is it not expected to be in operation before 2016? I hope it will be operational a lot earlier than that date.