New rules of the game: what the law on credit histories will change
10 October 11:05
In the first reading, the Verkhovna Rada adopted the draft law “On Credit History” aimed at protecting the rights of borrowers and increasing the transparency of the credit market. It establishes new rules for maintaining credit histories, updating and storing them, and also enshrines the rights of citizens to access and correct information. In addition, a number of changes apply to credit bureaus themselves. What new things does the draft law offer – investigated by "Komersant Ukrainian"
The main provisions of the draft law , as follows from the explanatory note, are as follows:
- New rules for maintaining credit histories and controlling this process are established.
- It defines the composition, updating and storage period of data (up to 10 years).
- The law establishes the rights of borrowers to access, correct and delete inaccurate information.
- It introduces consequences for lending to persons who have officially declared their unwillingness to receive loans.
- Close relatives of missing or deceased citizens will be able to access credit history (for the period of martial law).
- The use of data by third parties without the consent of the subject of the credit history is prohibited.
- Authorization of credit history bureaus is introduced with requirements for their structure and security.
- The possibility of cross-border data exchange with the consent of the borrower is envisaged.
- The NBU is empowered to supervise and impose sanctions.
- A public register of credit bureaus is created.
- Rules for disclosing banking secrecy and secrecy of financial services by credit bureaus are established.
Innovations in credit histories
Among the new and progressive features of this law, it is worth noting that a citizen will be able to file a statement of unwillingness to enter into new loan agreements, and after that any loan issued will be considered invalid. This protects against fraud and imposed loans.
Lenders will be obliged to submit information to credit bureaus within 2 business days, which should minimize delays and reduce the risk of data fraud.
The draft law clearly defines what data is included in the credit history, sets the period of its storage – up to 10 years – and the procedure for destroying information after this period.
Every citizen gets the right to free access to their credit history (currently a paid service), as well as the opportunity to correct or delete inaccurate information.
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The National Bank of Ukraine is empowered to control the activities of credit bureaus, including conducting inspections, certifying security systems, and applying enforcement measures in case of violations.
The law allows cross-border exchange of credit information, but only with the consent of the subject (borrower).
It is planned to create an electronic register of credit bureaus for open access and transparency.
Thus, based on the foregoing, consumer protection is enhanced, fraud is reduced, and financial discipline is strengthened. And most importantly, Ukrainian legislation is approaching international standards of personal data protection.
New law in the old way
Actually, this law is going to be adopted for the sake of international standards. This is a European integration bill initiated by the National Bank of Ukraine. And, according to economic expert Oleg Pendzin, there are no major changes.
“It is being adopted as part of our financial monitoring obligations. We are moving in the direction of European integration, and it is much easier to adopt a new law that meets European standards than to make numerous changes to the old one,” the expert notes.
Moreover, this law applies primarily to those who actively cooperate with banks in the field of consumer and commercial lending. This is especially important for those who take out commercial loans, where the amounts are larger and the risks are higher.
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At the same time, experts expressed many comments on the draft Law of Ukraine “On Credit History.” For example, there is no analysis of the effectiveness of the current law. It is not explained why a complete replacement rather than amendments to the existing law are needed.
Excessive amount of information in the credit history (e.g., residential address, marital status, number of dependents). Unreasonable expansion of the functions of credit bureaus, in particular with regard to the use of personal data.
Insufficient protection of consumer rights was also noted, given that the borrower is the “weak party” of the contract and needs special protection. It is also unacceptable to allow the lender to determine the amount of information transmitted under the agreement.
There is no analysis of how the changes will affect the financial burden of borrowers, especially for small loans. The draft law is too complicated for an average citizen to understand. It lacks conciseness and clarity, which makes it difficult to apply in practice.
It remains to be seen whether MPs will pay attention to this and make changes before the second reading.
Author: Alla Dunina
