One Scary Look at RA 9510, Credit Information Act

For commerce to grow, free flow of goods and services is key. There won’t be any flow if there are no infrastructure. Worse, there won’t be any flow if capital flow is hindered.

In a market economy where you have so many players in the field, especially in a credit-driven economy, there?s a mechanism to screen the prime from the subprime. It’s called credit ratings, thus were born the credit ratings agency. Their job is to rate how good you are as a debtor. Businesses rely on this information. In America, the higher your credit ratings are, the lower your interest rates are going to be on credit cards, mortgages and other loans. It works on both the debtor and the creditor. The debtor is safe to expect at the very least, of continued line of credit. The creditor is safe to expect at the very least, a return of capital and interest revenues. That’s your basic lending activity.

So, when Arroyo signed into law Republic Act 9510 or the Credit Information Act, which would consolidate credit information from financial institutions to facilitate creditworthiness checks, I thought that this was nice! It’s good! It’s a step in the right direction.

We do need to have some form of official credit ratings policy or mechanism to assists businesses, instead of them (businesses) doing it on their own. That impedes any economic activity. And when there’s too many walls and obstacles in commerce, don’t expect any growth for it just frustrates future entrepreneurs and venture capitalists. That’s when business becomes exclusive. The rich getting richer. The middle class are stucked in the middle because no one trusts them.

But is this reason enough for me to be happy and continue to be gay? Well, hold it.

What would this do? According to the report, “The law establishes the Central Credit Information Corporation which will pool data from banks, quasi-banks; and quasi-banks and their subsidiaries and affiliates; life insurance companies, credit card firms, government lending institutions and other credit facilities.”

There’s the big question if the banks will share those hard earned and guarded blue chip debtor information. But it’s the law, do they have a choice?

“A credible and comprehensive credit information system run by the Credit Information Corporation will cut credit processing times and therefore lower transaction costs,”

No question. She?s right on cost effectiveness.

“It will reduce risk of defaults with better credit information. It will reduce the credit premium charged by lenders and increase lending volumes. It will help expand the reach of credit to small and medium enterprises,”

I seem to agree on reducing the risk of defaults. But is it absolute? Not for pinoys. You see, how many times have we heard stories about the propensity of officials to manipulate records dahil ninong mo ang tatay na kabit nang pinsang inutangan mo na kaklase nang driver nang nanay na tyuhin nang best friend nang mayor na katabi ni governor. If credit information was produced clean and good, is delivered good, it will produce good results. Hello Garci? Did you get my point?

The Central Credit Information Corp., which will be headed by the chairman of the Securities and Exchange Commission (SEC), will provide credit data to financial institutions, those engaged in the business of credit reports and other information services, accredited third party providers which will handle data processing, and the borrowers themselves.

What if politics comes into play? Will CCIC release credit information to banks whom they perceive to be against any current administration? I wonder what kind of counter controls they have just to assure that there’s some form of equal opportunity at play?

All laws enacted are good. Is that a safe statement? I would assume so. They?re for the good of each one of us. When do they become useless for the many and useful to a few? It’s in the execution.

1. Who’s going to head CICC? Wil he/she be the BFF of the current administration?
2. What role do relatives, friends, lovers and their close ladies and gentlemen play in the hiring?
3. Are those in number 2 going to have a perfect credit score?

Of course, those are just hypothetical questions. But given our experiences, are my questions still hypothetical?

So, what?s my verdict?

Do I still have to explain the merits of competition? I believe that the current (American) western set-up (were this law was obviously copied) works well. Why? There are currently three major credit ratings agencies used internationally, or at least for US based businesses. Experian, Trans-Union and Equifax. Obviously, if you try to manipulate the other records, you?ll have some difficulty explaining why the other two have very different picture.

Now, If I am reading this right, it says that:

“The Central Credit Information Corp., which will be headed by the chairman of the Securities and Exchange Commission (SEC), will provide credit data to financial institutions, those engaged in the business of credit reports and other information services, accredited third party providers which will handle data processing, and the borrowers themselves.”

“The Central Credit Information Corp.”

“I pray they don’t grow up like the Comelec.

“Will provide credit data to financial institutions”.

“There is no competition.“

“They are the only one.”

“They will be our lord.”

In the meantime, I’d appreciate if someone could send me a copy of the Bill so we could double check what’s in there.

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