The law governing credit information systems in Rwanda came into force on the 14th of May, 2010. With private Credit Reference Bureaus (hereinafter referred as CRB’s) set to start operations in Rwanda, the law is timely. In essence the law will regulate the operation of CRB’s and the kind of information which credit providers can share about their clients with the CRB’s.
CRB’s are entities that collect and compile information concerning the repayment behaviour of individuals and businesses, for resale to banks, micro-finance institutions, insurance companies and other credit providers.
The benefits of CRB’s include; firstly, the rate of loan defaulting is slated to reduce drastically because lenders using credit reports furnished by CRB’s shall avoid lending to serial defaulters.
Secondly, with the advent of CRB’s, borrowers with good credit ratings will be rewarded for their good behaviour with lower interest rates charged by lenders based on the fact that they a lower defaulting risk.
In addition, both borrowers and lenders will benefit from CRB’s because loan applications will be processed much faster using the information provided by CRB’s.
Also, the CRB’s will benefit from revenues generated by subscription fees paid by credit providers to access information about potential borrowers.
The newly enacted law requires CRB’s to be register with the company registry as companies doing credit reference business in Rwanda.
In addition, the law stipulates that CRB’s ought to be licensed by National Bank of Rwanda (hereinafter referred to as NBR) before commencing their activities. NBR shall also regulate their activities once it licenses them.
Another important feature of the law is the requirement of consent of a borrower before a lender transmits any information relating to the borrower’s credit history to a CRB.
The requirement of consent is important because it affirms the banks’ duty of confidentiality towards its customer (the borrower). According to the law, when a borrower is applying for credit with his/her bank (lender), the borrower may sign a “consent” permitting his/her bank to submit information about his/her credit history to the CRB.
Upon such consent, the bank shall provide the borrower’s credit history to the CRB. The CRB shall store this information in its data base. In future it will merge this information with any other credit reports it may receive from the borrower’s lenders or insurers and compile a definitive credit report about the borrower. This report shall be regularly updated.
Also, pursuant to the law, the CRB may include in its credit report information related to a borrower’s charges and court cases in which the borrower is a litigant.
In case a borrower does not want to consent to his/her credit history being given to the CRB, he/she will notify the lender who shall inform the CRB and the CRB will note the refusal in its credit report about the borrower.
Similarly, under the law, before a lender can request a CRB for the borrower’s credit report it is required to obtain a borrower’s consent. Further, the law accords the borrower or bank customer the right to access his/her credit report from the CRB upon request.
In addition, under the law, a borrower may dispute the contents of his/her credit report if they contain erroneous information by writing to the CRB seeking rectification of the credit report and shall at the very least be entitled to have the matter investigated by the CRB.
Amongst the permissible purposes for which credit reports may be issued by CRBs are; upon request by lender to assess an application for credit, the extension of additional credit or reviewing or collecting existing credit facilities, upon request by an insurer to assess an application for insurance or an insurance claim or to monitor ongoing risk; upon request by a competent court or upon request by a borrower for his/her own credit report.
The above summary merely captures the salient features of the aforementioned law and is not a substitute to reading the actual law.
Richard Kalenzi is a lawyer