Banks and other lending institutions have been accused of lax in updating borrowers’ credit records with credit reference bureaus (CRBs), which has led to erroneous blacklists.
According to Jared Getenga, managing director of the Credit Information Sharing Association of Kenya (CIS Kenya), most of the data submitted to the three licensed CRBs in the country is inaccurate due to the preference of some lenders to send information only to the offices they know.
“You will find that some borrowers will borrow in the morning and repay in the evening, but the lender is slow to update the desks, with some not updating them until the end of the month. In the meantime, the borrower is not able to access credit again because there is no document indicating that he has paid, ”Mr. Getenga said in an interview.
The approved credit bureaus in the country are Metropol, TransUnion and Creditinfo International.
The problem of erroneous registrations saw the Central Bank of Kenya (CBK) ban unregulated mobile lenders from registering borrowers with CRBs in April last year.
The regulator also stopped blacklisting borrowers who owed less than 1,000 shillings at the height of the Covid-19 pandemic.
“This was a consumer protection decision because it is such a small amount and it could prevent a consumer from accessing more credit,” Getenga said. It also revealed that over 85% of loans listed with CRBs are performing, which does not amount to a blacklist as lenders are legally required to report the status of all loans on their books to the offices.
Getenga said that although the majority of non-performing loans fall under the low cost item category, the category has the highest percentage of performing loans.
He said that CRB files show positive responses from debtors and that, as many believe, CRB is not a blacklist to access loans.
Digital lenders have now backed proposed regulations that would place them under the supervision of the Central Bank of Kenya (CBK), saying the new rules will lower loan prices.
One of the requirements under the proposed regulation is that lenders undertake to update borrower records in a timely manner. All lenders are required to have signed the code by December 31 so they can be monitored for implementation.
Getenga said the CIS has developed a way for lenders to simultaneously submit borrower information to the three bureaus.
“A delay or downtime in any of them could affect consumers. Ultimately, the verification of a claim is only done when the information from all three offices is consistent, ”he said.
Borrowers, however, would be happy to know that a negative listing affects their credit score for only two years.
“There is, however, a five-year limit for in-office retention, which anyone who may want to understand the borrower’s story can take a look. It does not affect the score and does not appear in the credit report. This only applies to an adverse situation where the lender really needs to understand the borrower’s track record, ”Getenga said.
Over the past year, the country has seen a high number of borrower defaults due to a struggling economy, which has seen many people unable to meet their loan obligations, he explained.