What is a ‘Credit Report‘
A Credit Bureau, also known as Credit Reporting Agency or Consumer Reporting Agency, are privately set up companies that are licensed by regulatory agencies (CBN). To report loan history of consumers in other to assist prospective businesses or creditor in assessing the risks and taking the decision whether or not to extend to a prospective applicant or borrower any facility or services on facility.
In Nigeria, there are three credit reporting bureaus currently registered by Central Bank of Nigeria (CBN): XDS Credit Bureau , CRC Credit Bureau and the CR Services Credit Bureau. These agencies collects information about consumers’ personal details and their loan histories including bill-paying habits to create a unique credit report.
Section 57 of the CBN Act, 2007 authorizes it to license and regulate all the Credit Bureaus in Nigeria. In pursuance of its statutory responsibility, the CBN issued its latest Guidelines regarding Credit Bureaus in 2013 for the licensing and regulation of Credit Bureaus and Credit Bureau related transactions in Nigeria.
There is also the CBN Credit Risk Management System (CBN CRCMS) which commenced in 1998. The CBN CRMS is a public Credit Registry administered by the CBN to collate on a monthly basis all the credit facilities in excess of One Million Naira (N1,000,000) extended by Nigerian Banks to their Customers. The CBN CRMS focuses on banking loans while the bureau agency reports focuses on all consumer loans in banks and other non banking loans.
Banks are expected to procure at least 2 private bureau reports in addition to CBN CRMS on any of their customers seeking facility. The reports has 6 months validity as renewal of facilities after 6 months will mean a new report will be procured at the expense of the customer.
Credit report has brought a lot of sanity to consumer lending in Nigeria. Bank customers are often denied facilities because of bad credit reports. Issues such as unauthorized paltry debits, abandoned accounts that are in debit, loans from Microfinance Banks (MFB) that are not cleaned out and lots more can cause banks and OFI customers much needed credit when not regularized.
Customer seeking loan are now forced to approach previous lenders to clean out their debt because no new lender will advance fresh loans to them if the bad report is not regularized. Banks providing consumer credit can now be assured that bad credit customers can only hide for a while before they are forced to regularize their account.
Credit report has no doubt, brought a lot of sanity to consumer lending in Nigeria. nigerianbanker.com will advise that credit bureau report should be made mandatory KYC document for account opening purposes by all banks to further help sanitize the the banking industry.
Although this was part of the original permissible use of the Credit Bureau Report, competition must have made banks jettison its use for KYC since it is not made mandatory for banks.