New rules in credit history bureaus’ operation
A new law approved today by the Federation Council establishes the institute of qualified credit history bureaus (CHBs). They will supply data to creditors almost in real time to calculate a borrower’s payment-to-income ratio. In addition, all CHBs will assign personal ratings to individuals for them to understand their creditworthiness. The method for calculating payment-to-income ratios and general requirements for the rating assignment methodology will be stipulated by the Bank of Russia.
The new law has updated the list of transactions the information on which shall be submitted to CHBs and expanded the number of credit history sources. Specifically, CHBs shall receive data not only from banks and microfinance organisations, but also from lessors, guarantors, receivers, and mortgage agents.
The new approach will improve the accuracy of the assessment of borrowers’ payment discipline and help creditors to make lending decisions faster and more objectively.
This law also modifies the procedure for storing credit history data. The storage period which shall be seven years will be applicable to records on particular credit transactions, and not to a credit history in general. As a result, CHBs will decrease their costs, and creditors will be able to assess a borrower’s behaviour relying on the part of the credit history which is most relevant for this purpose.
The law expands the Bank of Russia’s supervisory authority in relation to CHBs. The regulator will be entitled to exclude CHBs from the state register without an arbitration award if any material violations are detected, as well as to establish requirements for the quality of CHBs’ management and internal controls, information security, and business continuity and recovery plan. The Bank of Russia will be authorised to specify requirements for the financial solvency of CHBs’ owners and executives, and to oblige CHBs to submit their reporting.
The new law will become effective on 1 January 2021. A number of its provisions will take effect later, so that CHBs and market participants have sufficient time to adjust their automated systems to the new requirements.