Credit Information System (CISA)

Credit Information System starts 2015


         On February 17, 2009, President Gloria Arroyo signed into law Republic Act 9520, the New Cooperative Code of 2008, replacing the Cooperative Code of 1990 signed into law by then President Corazon C. Aquino.

          It was considered a “milestone in the history of the cooperative movement.”
In the foreword to the Cooperative Code published by the COOP-NATCCO Partylist, it says: “The updated Code includes provisions that aim to strengthen, mainstream and protect local coops; promote self-regulation, and strengthen government regulation by tightening requirements for co-op registration, making pre-membership seminars mandatory, improves access of co-ops to government support and services, and many more.”Five years after the initial euphoria, co-ops are now faced with another law – RA 9510 – or the Credit Information System Act (CISA). Actually, RA 9510 should have been implemented earlier than RA 9520 but due to its technological complexity, is taking longer to implement.Few know that seven months earlier in July 2008, President Arroyo had signed RA 9510 into law. CISA requires lending institutions like co-ops and banks to be part of the Credit Information System (CIS), which allows financial institutions to access a database of borrower information to bolster the credibility and viability of small yet responsible borrowers.The establishment of such a system will also lower the cost of financing since the cost of gathering credit information will no longer be passed to the borrower, but will be readily available at the lowest possible cost to financial institutions. And it also eases decision-making on loan applications.

          The CIS will be fully operational in 2015, and all lending institutions – including cooperatives -- enrolled in the CIS will be required to submit names of borrowers and their credit information, which will be available to other lending institutions that are likewise enrolled in the CIS.A World Bank study in 51 countries showed that a credit bureau results in improvements in the overall financial industry. The creation of a CIS results in a significant increase in the volume of lending, particularly to previously excluded sectors like the micro, small and medium enterprises. International experience shows the creation of such a bureau increases the probability of a small firm obtaining a bank loan increase from 28% to 40%.The entity implementing the CISA will be the Credit Information Corporation (CIC), which is created by RA 9510. Section 5b of the Act says “The National Government shall own and hold 60% of the common shares while 40% shall be owned and held by qualified investors which shall be limited to industry associations of banks, quasi-banks, and other credit-related associations . . .”; but none of these can own more than 10% of the shares.Section 5 says: “The CIC’s primary purpose is to receive and consolidate basic credit data, to act as a central registry or central repository of credit information, and to provide access to reliable, standardized information on credit history and financial condition of borrowers.”Other government agencies involved in the implementation of the CISA are “Relevant Government Agencies” as the Department of Finance, Department of Trade and Industry, the Insurance Commission and the Cooperative Development Authority.Co-operatives will be “submitting entities” that will submit credit information to the CIC, as well as “Accessing Entities”, or accessing credit data of loan applicants.

          The Act lists down “submitting entities” as “banks, quasi-banks, trust entities, investment houses, cooperatives, NGOs, micro-financing organizations, credit card companies, insurance companies and government lending institutions.Submitting entities are required to submit to the CIC both negative and positive credit information on a quarterly basis. On the other hand, borrowers will be informed that their information is being submitted to the CIC.The Implementing Rules and Regulations of the CISA lists down the required data of individual borrowers as name, birthdate, sex, civil status, residence for the last two years, employer and position or business for the last 5 years, number of children, Tax Identification Number or Social Security Number, Net Income, owner of the house occupied, car/s owned, bank/s where accounts are maintained, and other real or personal assets.For cooperatives, Rule 4.4d lists: Number & date of registration, Cooperative Identification Number, Primary purpose of business, term of existence, principal place of business, TIN, Directors & Officers, Number of Employees, Average Net Surplus for the last two years, Monthly expenses, Banks where accounts are maintained, other assets, and Board Resolution authorizing the borrowing institutions or submitting entityConfidentiality was also addressed by the CISA: “The Corporation and other parties shall hold the credit information under strict confidentiality and shall use the same only for the declared purpose of establishing the creditworthiness of the borrower.

          The accreditation of an accessing entity, a special entity and/or an outsource entity which violates the confidentiality of, or which misuses, the credit information accessed from the Corporation, may be suspended or revoked, in addition to the possible criminal liability of violators.”