Guideline on the sharing and use of consumer credit data through a credit reference agency

The Hong Kong Monetary Authority (HKMA) has today (Friday) issued a statutory guideline on the sharing and use of consumer credit data through a credit reference agency (CRA).

The Guideline aims at specifying the minimum standards that authorized institutions (AIs) should observe in relation to the sharing and use of consumer credit data through a CRA.

In response to the financial industry's proposal, the Privacy Commissioner for Personal Data has, pursuant to his power under Section 12(3) of the Personal Data (Privacy) Ordinance (PDPO), approved a revised Code of Practice on Consumer Credit Data to allow for a wider sharing of consumer credit data. The Code will become effective on 2 June 2003.

The Guideline requires that AIs should have clear and comprehensive policies and procedures for the sharing and use of consumer credit data through a CRA to ensure compliance with the requirements of the Code. The policies and procedures should be designed to:

• ensure the security, confidentiality and integrity of consumer credit data; and
• guard against unauthorised access to or use of such information that could result in a breach of the Code and the data protection principles and relevant provisions under the PDPO.

"AIs should ensure adequate management oversight, at an appropriate senior level, on the development, implementation, and maintenance of these policies and procedures," said Mr Raymond Li, Executive Director of the HKMA. "Any non-compliance should be followed up, investigated, rectified and reported to management," he added.

AIs are required to conduct a compliance audit at least annually to verify whether their data management practices are adequate to ensure compliance with the requirements of the Code, the Guideline, and internal policies and procedures regarding the sharing of consumer credit data.

The Guideline also requires all AIs that are involved in the provision of consumer credit to participate as fully as possible in the sharing and use of consumer credit data through a CRA within the framework laid down by the Code. Mr Raymond Li said, " a fully-fledged consumer credit database, including positive and negative data, will be beneficial to AIs and customers. However, to realise such benefits, the database must be adequately comprehensive and AIs need to make full use of the database in their credit decisions."

To address the concerns about a possible credit crunch, the Code has provided for a 24-month transitional period starting from the "effective date" of the implementation of positive data sharing. During the transitional period, credit providers may only access to the new credit data for limited purposes as specified in the Code. These include assessing new credit applications from customers, facilitating an existing loan restructuring, arranging a scheme of arrangement at the request of the customer, or setting up a loan restructuring arrangement where there is a default in excess of 60 days. The Guideline also provides that when the information obtained from the CRA reveals that a customer has an unmanageable level of indebtedness and might have genuine difficulty in repayment, AIs should not hastily demand immediate repayment of loans or reduce credit lines. Instead, AIs should follow the guidelines set out in the "Hong Kong Approach to Consumer Debt Difficulties" and, as far as possible, work out a mutually acceptable solution with the customer.

The Guideline, which is published in the Government Gazette today, is available at the HKMA website http://www.hkma.gov.hk.

For further enquiries, please contact:

Thomas chan, Senior Manager (Press), at 2878 1480 or
Sylvia Yip, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
30 May 2003