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Published online by Cambridge University Press: 02 April 2020
Credit reporting is the act of gathering information about the behaviour of borrowers and making such information available whenever a decision is to be made regarding a borrower's application for new credit. Following the introduction of credit bureaux in Nigeria in 2007, in 2017 the federal legislature enacted the Credit Reporting Act, creating a legal framework for the implementation of credit reporting and codifying global best practices adhered to in the practice and administration of credit reporting. This article examines the act in the light of its objectives and attempts to determine whether the legal framework it provides is conducive to the achievement of these objectives. It also considers the factors that might militate against the effective running of a credit reporting system in Nigeria and suggests measures to deal with these challenges.
PhD (Lagos), LLM (Nigeria), LLB (Lagos), BL. Professor of law, Faculty of Law, University of Nigeria, Enugu Campus.
PhD (Stirling, UK), LLM (Glasgow Caledonian, UK), LLB (Uyo), BL. Lecturer in law, Faculty of Law, University of Nigeria, Enugu Campus.
LLM (Benin), LLB (Benin), BL. Research candidate / assistant, Faculty of Law, University of Nigeria, Enugu Campus.
1 N Mylenko “Developing credit reporting in Africa: Opportunities and challenges” (paper presented at African Finance for the 21st Century, a high-level seminar organized by the IMF Institute for Capacity Development in collaboration with the Joint Africa Institute, session VI: “Designing context-specific solutions: Reforms in weak institutional environments”, Tunis, 4–5 March 2008) at 1.
2 K Haney “How many credit bureaus are there in the United States?” (25 April 2018), available at: <https://www.growingfamilybenefits.com/how-many-credit-bureaus-are-there/> (last accessed 25 February 2020).
3 AT Popoola “Role of credit bureaus in effective risk management” (paper delivered at the second Annual Credit and Collection Conference, organized by the Institute of Credit and Collection Management of Nigeria, Lagos, 11 November 2014) at 2–4.
4 American Consumer Credit Counselling “Understanding credit reports”, available at: <https://www.consumercredit.com/financial-education/credit/understanding-credit-reports> (last accessed 25 February 2020).
5 An example is the FICO Score, which is the most widely used credit score in the USA. It was developed by the Fair Isaac Corporation. See Sallie Mae and FICO “Understanding credit: What it is, why it is important, and how you can maintain it”, available at: <https://www.salliemae.com/assets/products/landing/FICO/understanding-credit-handbook-pdf.pdf> (last accessed 27 February 2020).
6 This shows all the credit facilities that the customer has previously had and currently operates. It also shows the length of the individual's credit history.
7 This section details how an individual has paid his debts, including how much he has paid and how much remains unpaid.
8 This section is generated when an individual applies for credit and the creditor accesses their credit report. It usually has an impact on the individual's credit rating.
9 This deals with the interaction between an individual's private credit life and public institutional and regulatory standards and procedures. It includes a record of events such as law suits and bankruptcies.
10 The consumer statement contains additional information the individual desires to be included in the credit report for some reason.
11 CBN “Credit risk management system”, available at: <https://www.cbn.gov.ng/Supervision/crms.asp> (last accessed 25 February 2020).
12 CRC Credit Bureau Limited, CR Services Credit Bureau Plc and First Central Credit Bureau (formerly XDS Credit Bureau Limited).
13 This is the principal statute dealing with credit reporting and it is this statute that the CRA emulates the most. This law dictates how credit data can be collected and used. Its provisions govern not only the activities of credit bureaux and data subjects, but also those bodies that supply information to credit bureaux. It applies to banks, credit unions, agencies that sell medical records and cheque writing or rental history records, as well as businesses that rely on credit reports for hiring. Notably, this law compels credit bureaux to ensure the accuracy of the information they gather.
14 This act protects applicants for mortgages and empowers them to call for their credit reports. It helps to prevent monetary and identity theft as well as fraud, by putting in place security standards and procedures. It also makes provisions for mitigating the effects of past incidences of identity theft and fraud by providing for the use of fraud alerts and the blocking of negative information generated by criminals.
15 This law prevents lenders from discriminating against people or businesses based on non-financial factors. It also applies to businesses, unlike most other laws that only apply to individuals.
16 This act applies to any person or business that takes money in exchange for improving credit and protects people in their dealings with credit repairers.
17 CRA, sec 1.
18 Id, sec 8.
19 Id, sec 4.
20 The Guidelines, reg 10.3.
21 Id, reg 10.4.
22 World Bank “General principles for credit reporting” (September 2011), available at: <http://siteresources.worldbank.org/FINANCIALSECTOR/Resources/Credit_Reporting_text.pdf> (last accessed 25 February 2020).
23 Id, para 217.
24 Id, para 218.
25 Id, para 223.
26 Id, para 226.
27 Id, para 227.
28 The Guidelines, reg 3.
29 Id, reg 4.
30 CRA, sec 12.
31 Id, sec 2(3).
32 “The credit bureaus aren't who you think they are” (10 February 2015) The Pete the Planner Blog, available at: <https://petetheplanner.com/our-focus-on-our-credit-reports-have-taken-us-to-an-ugly-place/> (last accessed 25 February 2020).
33 This is because investment banks do not lend directly to individuals, even though they underwrite transactions by credit bureaux.
34 CRA, sec 3. Credit information is defined under the act as information bearing on a person's credit worthiness, credit standing or capacity, and the history and profile of such person with regard to their credit, assets and any financial obligations, including the person's demographic data and such other information that may aid credit decision making.
35 Id, sec 3(c). A credit report “is an electronic or other written report, credit score or statement issued by a credit bureau and that is used or collected to serve as a factor in establishing the data subject's eligibility for credit or some other service or product provided by a person on a credit basis or for other permissible purposes, and which shall include, among other things, all or part of a data subject's credit information that is available on such credit”: id, sec 27.
36 Id sec 3(3).
37 Id, sec 4.
38 Id, sec 9.
39 Id, sec 9(3)(b).
40 Id, sec 9(6)(c).
41 Id, sec 6(d).
42 Id, sec 6(f).
43 Id, sec 9(6)(b).
44 Id, sec 13(6).
45 Id, sec 13(7)–(8).
46 Id, secs 20–23.
47 Id, sec 14.
48 Under id, sec 27, a “‘person’ includes any individual, company, corporation, unincorporated association or body (including a partnership, trust, joint venture or consortium), government, state, agency, organization or other entity whether or not having separate legal personality”.
49 CRC Credit Bureau Limited “The doyen of credit reporting in Nigeria”, available at: <https://crccreditbureau.com/media/the-doyen-of-credit-reporting-in-nigeria> (last accessed 25 February 2020).
50 Ibid.
51 B Famoofo “Ease of doing business: Nigeria's prospect bright with reforms” (25 November 2018) ThisDay (Abuja), available at: <https://www.thisdaylive.com/index.php/2018/11/25/ease-of-doing-business-nigerias-outlook-bright-with-reforms-2/> (last accessed 25 February 2020).
52 World Bank Group Doing Business 2019: Economy Profile of Nigeria, available at: <http://www.doingbusiness.org/content/dam/doingBusiness/country/n/nigeria/NGA.pdf> (last accessed 25 February 2020).
53 CRC Credit Bureau Limited “Research has shown that credit penetration is still very low in Nigeria”, available at: <https://www.crccreditbureau.com/media/research-has-shown-that-credit-penetration-is-still-very-low-in-nigeria> (last accessed 25 February 2020).
54 World Bank Group Doing Business 2019, above at note 52.
55 See Sallie Mae and FICO “Understanding credit”, above at note 5.
56 For more information on this concept, see Bank of America “5 C's [sic] of credit: What are banks looking for”, available at: <https://www.bankofamerica.com/smallbusiness/business-financing/learn/5-cs-of-credit/> (last accessed 25 February 2020).
