Senate Passes Credit Information System Act

Voting 15-0, the Senate yesterday passed the bill creating a credit information system in the country.

Calling it a "tool for financial development," Senator Edgardo Angara said that the CIS will make credit more available, especially to small yet responsible borrowers[i], as their good track record in paying their obligations will be made known to financial institutions."

According to Senator Angara, author of the CIS act, the Credit Information System[ii] will gather consumer credit information from financial institutions such as banks, credit card companies, and government lending institutions.

Salient amendments to the CISA include requiring the CIS to submit for approval to a congressional oversight committee a draft information sheet that it would use to obtain information from borrowers, and that this information should be objective and factual.

"The information sheet should ask only objective questions, as much as possible answerable in a yes or no," said Senator Angara, chair of the Senate Committee on Banks and Financial institutions.

"To give a clean slate to all borrowers, the CIS will not have a retroactive effect. Meaning, the database will gather information on borrowers after the enactment of the law establishing it," Senator Angara said.

Senator Angara explained that a CIS will also help lower the cost of financing. Because the CIS will reduce the cost of gathering credit information, the amount to be passed on to borrowers will likewise be lower. This will also lessen the risk of lending money, and hence reduce interest rates on loans.

"The CIS will encourage responsible borrowing attitude as debtors will know that a negative credit behavior will remain in their record," the senator said.

"Borrowing is necessary to fuel business and sustain economic growth. By establishing a credit information system , we reduce the risk of credit, allow more people to access it, and ultimately contribute to a healthier and more stable financial system," Senator Angara asserted.

The Credit Information System Act has been ratified by the Senate on the third reading during the last congress, but failed to get ratified due to technical reasons.

[i] The Credit Information System will cover all borrowers. It will gather both positive and negative information. To avoid damage to one's financial reputation, borrowers would have the full right to know the credit information about them and shall be able to dispute and correct inaccurate information. There are also safeguards to be imposed against breach of confidentiality and misuse of borrower information.

[ii] Structure of the CIS: The Credit Information System will gather consumer credit information from financial institutions such as banks, credit card companies, and government lending institutions. A Central Credit Information Corporation will process the information gathered and distribute them through the "accessing entities", who are likewise the primary providers of credit data (i.e. banks). Credit rating agencies can source information from the System and may use them for creating credit reports and ratings, and may add whatever value to the report as required by their customers. Access to the system will be basically limited to the credit institutions which are likewise the contributors of information.