Credit Reporting Regulation: The European Experience

1. E C R I Understanding Credit Markets for Europe Credit Reporting Regulation: The European Experience Regional Conference on Credit Reporting in AfricaOctober 5-6, 2006 Cape Town, South Africa Dr. Nicola Jentzsch European Credit Research Institute Centre for European Policy Studies

2. E C R I Understanding Credit Markets for Europe 1. European Overview • EU-25 • Harmonization of data protection regimes • No harmonization of credit reporting systems • Industrial organization of credit reporting industry differs • Overview: • 25 countries have general data protection laws • 2 countries have “industry”-specific or “topic”-specific law

3. E C R I Table 1. Credit Reporting Systems in Europe Note: Not displayed due to lack of information are Denmark, Malta, Luxemburg, Slovakia and Slovenia

4. E C R I Understanding Credit Markets for Europe 1. European Overview Figure 1. Market Structures

5. E C R I Understanding Credit Markets for Europe 1. European Overview: Three Examples UK: No public credit register Competitive private industry Increase of consumer protection GER: Public credit register with high (!) threshold Increasing competition in private credit reporting Data protection approximately same level FR: Public credit register with low (!) threshold No private credit reporting Data protection stayed the same

6. E C R I Understanding Credit Markets for Europe 2. Regulatory Regimes in Europe Primary Instrument: EU Data Protection Directive • Historical background- Basic rights of the “data subject”- Basic obligations for “data controllers”- Tasks for the supervisory authority Regional cooperation and harmonization!

7. E C R I Understanding Credit Markets for Europe 2. Regulatory Regimes in Europe Survey of credit reporting regulation Jentzsch (2006) 100 Countries (in 2003/2004) 35 had general data protection laws 8 countries had industry-oriented law Scheme of rating of laws and regulations

8. E C R I Understanding Credit Markets for Europe 2. Regulatory Regimes in Europe • Evaluation and rating of laws in 40 aspects: • Supervisory Authority (8) • Property Rights to Information (9) • Obligations of Credit Bureaus (9) • Trans-border Data Flows (5) • Tasks of Information Furnishers (7) • Sanctions (2)

9. E C R I Understanding Credit Markets for Europe Figure 2. Overview of Regulatory Regimes in Europe

10. E C R I Understanding Credit Markets for Europe 3. Developments in African Countries More and more credit reporting agencies are founded Regulatory regimes only come into existence Important for the security of operations of the industry Case: South Africa Credit reporting industry existed there for years! National Credit Act plus credit reporting regulations Consumer protection increased

11. E C R I Understanding Credit Markets for Europe 3. Developments in African Countries Case: South Africa Authority is the National Credit Regulator Basic consumer rights: access, correction, time periods Obligations for credit bureaus such as registration, disclosure for specific purposes Tasks for information furnishers such as banks For trans-border data flows, regional cooperation is important!

12. E C R I Understanding Credit Markets for Europe Conclusions Countries follow different paths in credit reporting regulation Regulations should be tailored to development stage of the credit reporting industry It is important to learn from other countries’ experience In developing countries, credit reporting agencies should not be overburdened with cumbersome regulations They will play an important role for increasing access to finance!