Banks on the spot over erroneous CRB listings

Last year, the country witnessed a high record of defaults by borrowers on the back of a battered economy. [Courtesy]

Banks and other lending institutions have been accused of laxity in updating borrowers’ credit records with Credit Reference Bureaus (CRBs), leading to erroneous blacklisting.

According to Credit Information Sharing Association of Kenya (CIS Kenya) Chief Executive Jared Getenga, most of the data submitted to the country’s three licensed CRBs is inaccurate because of some lenders’ preference to send information only to bureaus they are acquainted with.  

“You will find that some borrowers will borrow in the morning and repay in the evening, but the lender is slow in updating the bureaus, with some only updating them at the end of the month. In the interim, the borrower is unable to access credit again as there are no records to show that they have paid,” said Mr Getenga in an interview.

The licensed credit bureaus in the country are Metropol, TransUnion and Creditinfo International.

The issue of erroneous listings saw the Central Bank of Kenya (CBK) bar unregulated mobile lenders from listing borrowers with CRBs in April last year.

The regulator also stopped the blacklisting of borrowers owing less than Sh1,000 at the height of the Covid-19 pandemic.

“This was a consumer protection decision because it is such a small amount, and it might prevent a consumer from accessing more credit,” said Getenga. He also revealed that over 85 per cent of loans listed with CRBs are performing, which does not equate to blacklisting, as lenders are by law required to report the status of all loans in their books to the bureaus.

Getenga said although a majority of the non-performing loans are in the category of the small-ticket items, the category boasts the highest percentage of performing loans.

He said CRBs’ records show positive responses by debtors and that CRB is not, as many believe, a blacklist from accessing loans.

Digital lenders have now backed proposed regulations that would put them under the Central Bank of Kenya (CBK) supervision, saying the new rules will push down loan prices. 

One of the requirements under the proposed regulations is for lenders to commit to timely updating of borrowers’ records. All lenders are required to have signed up to the code by December 31 so that they can be monitored for implementation.

Getenga said CIS has devised a way for lenders to submit borrowers’ information to the three bureaus simultaneously.

“A delay or downtime in one could affect consumers. In the end, the verification of a claim is only done when the information in the three bureaus is consistent,” he said. 

Borrowers would, however, be pleased to know that a negative listing only affects their credit score for only two years.

“There is, however, a five-year limit for retention in the bureau, where someone who may want to understand the history of the borrower may peek into. This does not affect the score and does not appear in the credit report. It only applies for an adverse situation where the lender really needs to understand the borrower’s background,” said Getenga.

Last year, the country witnessed a high record of defaults by borrowers on the back of a battered economy, which saw many people unable to honour their loan obligations, he explained.