New credit bureau raises questions among UAE banks

18 November 2014

Lenders concerned about responsibility for credit data quality

Some major UAE banks are hesitant about using the newly established Al-Etihad Credit Bureau due to concerns about who is liable for the accuracy of the data.

“We have some issues with the credit bureau that we are trying to sort out,” said Abdul Aziz al-Ghurair, chairman of the UAE Banks Federation and CEO of the Dubai-based MashreqBank, speaking to reporters on 17 November.

“Banks are responsible for actions taken on the information they give, but the credit bureau should also be responsible and liable for the information they give,” he said.

He says that a number of large banks are not using the bureau due to these concerns.  

“Some banks are not utilising it…the big ones. We haven’t yet fully activated the bureau,” he said.

The bureau was launched in September having compiled 24 months-worth of consumer credit data from 43 UAE banks and financial institutions, detailing customers’ debt levels, defaults and credit payment history.

All banks in the UAE are required to eventually provide credit information.

An additional barrier to the widespread use of the credit bureau is the need for banks to seek customers’ permission to access credit information from bureau.

“It is not practical at all,” Al-Ghurair said during a briefing at the Middle East Banking Forum in Dubai.

The UAE banking federation is currently in talks with the credit bureau about ways to resolve these concerns including a potential change in the law to allow access to the bureau’s information without customer consent.

The bureau was set up to encourage responsible lending and borrowing in the UAE, reducing the volume of customer defaults.

Armed with better credit information, banks should be able to price loans and other financial products at a rate that better reflects the risk, which means in some cases the cost of borrowing could reduce.

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