Credit Information Sharing Association of Kenya (CIS Kenya) has launched the draft credit information sharing code of conduct. The proposed draft invites the public for comments by 30 June 2020.
The code of conduct intends to strengthen the credit information sharing mechanism in Kenya to ensure the fair treatment and protection of borrowers. The code of conduct applies to third party credit information providers. Third-party implies unregulated credit information providers such as digital lenders – Branch, Tala, Shika, and Zenka.
Credit Information refers to information about a person or company’s ability to pay its debt, examined by credit providers before they decide to lend money. Credit information is important as it;
- improves credit risk management
- reduces the risk of credit provider failure
- increases access to finance
- reduces reliance on collateral
- curbs over-indebtedness
- assists in the monitoring of credit markets
Important to note is that financial institutions regulated by the Central Bank of Kenya (CBK) already share credit information with the regulator. These include commercial banks, microfinance banks, and registered SACCOs. Speaking during a Zoom webinar CIS Kenya CEO, Jared Getenga, said that banks have voluntarily agreed to subscribe to the code of conduct. He added that
CBK will require third party credit information providers to subscribe to the code
Jared Getenga – CIS Kenya CEO
This Code outlines the minimum ethical requirements for all Members of the Association and provides for a self-regulatory framework. It provides a framework for Members to make good quality decisions about data sharing and to align with best practices on credit information sharing and consumer protection. The proposed data sharing and credit reporting principles include;
- Lawfulness – customer information must be shared in accordance with applicable laws and regulations and international best practice
- Minimality – sharing of credit information must be adequate, timely, relevant, and not excessive in relation to the purposes for the sharing. Information shared must be restricted to what is permitted under the law
- Consent and purpose specification – Where the law does not mandate credit information sharing, Members are required to obtain clear and specific consent from their customers to share their credit information. As much as possible Members will ensure that consent is granted in writing
- Data retention periods – Credit information shall be retained by the bureaus for the minimum period stipulated in the CRB Regulations. No Member will seek to have information expunged from the credit report before the stipulated period
- Information quality – Consumer Credit Information must be accurate, complete and up-to-date. CRBs and Members are both responsible for the quality of consumer credit information. Members must update customer records
- Notification to consumers – Members must issue customers with specific pre-listing, post-listing and adverse action notices as well as any other notice stipulated in the CRB Regulations
- Full file sharing – Members undertake to share full file information daily with all licensed CRBs. They also undertake to update credit information as soon as any change occurs and to correct any errors as soon as they are noticed
- Security and confidentiality – Credit information must be protected against, accidental, unlawful destruction, unlawful intrusion, loss and wrongful alteration, unauthorized disclosure and access by an unauthorized person
- Access to credit information – Members will provide consumers with credit reports under all circumstances stipulated under the Regulations
- Data standardization – Members undertake to share data using the most current DST and through the industry Data Validation Tool provided by the Association in line with the CRB Regulations
Sanity in the credit market
The proposed code of conduct will bring sanity to the credit market. In this case, it will set a standardized credit information environment that promotes a code of ethics; trust, integrity, and spells out unacceptable behavior. In addition, it will give market players an opportunity to police themselves.
Lawyer Eliud Ogutu lauded the code of conduct as a key development in the credit sector as it sets customer rights protection as paramount. He said that it complements the CBK regulation and oversight mandate.
The code of conduct will be presented to CBK for approval before roll-out.
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