A joint select committee of Parliament is now reviewing a bill that when debated into law will establish a system to track the credit history of Jamaicans.

Essentially, the 'credit reporting bill' deals with the licensing, operation and regulation of a credit bureau, which it describes, unhelpfully, as a company licensed under the act.

However, based on their operations in other jurisdictions, a credit bureau can be defined as a company that compiles and stores data concerning the financial history of a consumer that relates to his/her creditworthiness.

These data are then made available to banks and other financial institutions, usually for a fee, and are sought whenever the consumer comes to the financial institution in search of credit.

Information stored by bureau

The information stored tends to cover the consumer's financial means, details of loans taken, details of securities, such as guarantees and mortgages given to creditors, and a history of the consumer's financial transactions.

The term 'consumer' in the bill includes companies. Credit bureaux generally cannot receive negative information that is more than seven years old and cannot be given information on claims that are statute barred.

How information is obtained

Under the bill, a credit bureau may obtain a consumer's details from entities such as banks, building societies, licensed financial institutions, cooperative societies, licensed securities dealers and insurance companies.

They are collectively called credit-information providers.

Interestingly, no tax agency is listed as a provider.

In addition, credit bureaux are prohibited from disclosing information that they receive from an unapproved source.

Maintaining confidentiality

The credit bureau is required to store the information in a 'secure' manner.

Presumably, it will be the regulator - expectations are that it will be the Bank of Jamaica - that determines what passes for secure storage.

Credit bureaux and credit-information providers are also required to regard all documents and information disclosed to them as being 'secret and confidential'. Again, these are words that are open to interpretation, and it is likely that compliance will depend on the integrity of the bureaux and the financial institutions handling the information and the diligence of the regulator.

Also, the information held by a credit bureau must be stored in Jamaica.

This is consistent with the other provisions of the bill that stipulate that only Jamaican companies that have their principal office in Jamaica can become licensed credit bureaux.

Permitted disclosures

Credit bureaux may disclose information to credit-information providers, the regulator, and to other entities if permitted by statute or court order. However, in order for the banks and other credit-information providers to obtain the consumer's information, they must have the written consent of the consumer.

Also, the consumer can request a copy of the credit report.

It can be safely assumed that it will be the credit-information providers that will be the main solicitors of credit reports, therefore, consumers should prepare themselves to be routinely asked to permit the disclosure of their credit details as a prerequisite to entering into any credit-related transaction.

Privacy issues

Credit-information providers can only disclose consumer information if it is reliable. Where there is a duty of confidentiality to the consumer, such as the banker-client relationship, the consumer must consent to the disclosure in writing.

If this provision remains in the bill, difficulties could arise when a new credit bureau attempts to build a repository.

This is because consumers may simply not want their banks to disclose their transaction details and then the banks will be constrained.

In the absence of an amendment to this provision, it remains to be seen what incentive the credit bureau and or the banks can give consumers to encourage them to disclose their details to the bureau.

Credit reports

Under the proposed legislation, consumers would get one free credit report a year. Subsequent reports are supplied at a charge.

Credit bureaux are understandably barred from disclosing information which they know is misleading or false and, therefore, they are required to investigate claims of inaccuracy or incompleteness by the consumer.

If the consumer is dissatisfied with the steps taken by the credit bureau to resolve their claims, they can complain to the regulator.

Either the credit bureau or the consumer can appeal the regulator's decision at an appeal tribunal. Undoubtedly, this process will be time-consuming and expensive. As recent economic conditions have taught us, livelihoods - be it a person or a company - often turn on the ability to access credit.

Therefore, the regulator is encouraged to ensure that all disputes are resolved at the earliest possible juncture.

As simple as it sounds, no ones wants to spend considerable fees and time away from work that an employer may be loathe to give, to prove that you did indeed finish paying for that refrigerator that was taken out on hire purchase five years ago.

Who can operate credit bureau

Only Jamaican companies can apply to become licensed credit bureaus.

An applicant's directors, managers and major shareholders must pass detailed fit-and-proper tests and of course, these persons must submit to credit checks by the regulator.

The bill also catches Jamaican companies which disclose credit details for a fee to persons outside of Jamaica and requires them to do it in accordance with the provisions of the proposed legislation.

Therefore, those persons involved in cross-border transactions should be wary and seek legal counsel to ensure compliance.

The bill is still in the discussion stage and, therefore, may be amended before it is put to the House of Representatives for a vote.

However, its current provisions appear to provide the framework by which scrupulous and well-regulated entities can provide much-needed credit-reporting services to financial institutions and consumers alike.

Roxanne Miller is an attorney at the law firm DunnCox in Kingston.