New Credit Information System Act

Delait Office of the Eccretary TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES ) First Regular Session SEP 16 A9:32 SENATE RECEIVED BY: S. No. 1388 Introduced by Senator MARK A. VILLAR AN ACT ABOLISHING THE CREDIT INFORMATION CORPORATION, TRANSFERRING ITS FUNCTIONS TO THE BANGKO SENTRAL NG PILIPINAS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 9510 OR THE "CREDIT INFORMATION SYSTEMS ACT" EXPLANATORY NOTE According to the World Bank, credit reporting systems are critical in an economy for expanding access to finance, extending financial inclusion, and supporting the development of stable financial systems. In the Philippines, the Credit Information Corporation (CIC), created by Republic Act No. 9510 or the "Credit Information System Act", serves as the country's Public Credit Registry (PCR) to act as the central registry or repository of credit information and to provide access to reliable and standardized information on credit history and the financial condition of borrowers. Additionally, the CIC also offers value-added services as a Private Credit Bureau (PCB), providing credit history data. Under Republic Act No. 10149 or the "GOCC Governance Act of 2011" and Executive Order No. 292 or the "Administrative Code of 1987" the President has the power to re-organize, merge, or streamline the operations of GOCCs upon review and recommendation of the Governance Commission for GOCCS (GCG), particularly when their regulatory and commercial functions conflict. A 2020 study by the Makati Business Club and the Policy and Economic Research Council found that the CIC's performance was undermined by its dual role as both a regulator and a PCR, along with its commercial activities as a PCB. To

address this issue, the study recommended transferring the CIC's functions to the Bangko Sentral ng Pilipinas (BSP), which is aligned with the World Bank's report that a vast majority of countries assign regulation of and authority over credit reporting services to their central banks. This approach is not only sound, but also appropriate, since establishing and maintaining an efficient credit information system is consistent with the BSP's mandate to regulate and supervise credit-granting businesses and strengthens the BSP's policy formulation capabilities in pursuit of financial stability. Thus, this bill seeks to institutionalize the transfer of the CIC's functions to the BSP by abolishing the CIC, liquidating its assets and liabilities, and disposing of its shareholdings under the supervision of the GCG. The bill likewise streamlines credit information processes, enhances regulatory oversight, encourages minimal cost for credit data, protects consumer rights, and ensures fair competition. In this way, a more efficient credit reporting system may be pursued so that its benefits may ultimately redound to the good of the Filipino people. In view of the foregoing, the approval of this bill is earnestly sought. MARK A. VILLAR

Senate Difice of the secretary REPUBLIC OF THE PHILIPPINES PUT OF THE PASPEE First Regular Session 25 SEP 16 A9:32 SENATE 1388 RECEIVED BY S. No. - Introduced by Senator MARK A. VILLAR AN ACT ABOLISHING THE CREDIT INFORMATION CORPORATION, TRANSFERRING ITS FUNCTIONS TO THE BANGKO SENTRAL NG PILIPINAS, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 9510 OR THE "CREDIT INFORMATION SYSTEMS ACT" Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "New Credit Information

2 System Act."

Sec. 2. Declaration of Policy. - The State recognizes the need for a centralized

credit information system to enhance credit availability by providing cost-effective 5 mechanisms and reducing reliance on collateral. The State is committed to offering 6 credit data at minimal cost, protecting consumer rights, and ensuring fair competition. 7 An efficient credit information system will help financial institutions reduce credit risk, promoting a healthier and more stable financial system. To achieve these goals, the powers and functions of the Credit Information Corporation (CIC) shall be transferred to the Bangko Sentral ng Pilipinas (BSP), streamlining credit information processes and enhancing regulatory oversight. The State recognizes that the establishment and maintenance of an efficient credit information system: (i) is consistent with the mandate of the BSP to effectively regulate and supervise credit granting businesses, among others, as may be determined by the Monetary Board; (ii) is key to financial stability which is a shared objective of the BSP alongside relevant government agencies; and iii) will strengthen the policy formulation of the BSP, specifically in the areas of banking and credit.

The State recognizes further that the data from the credit information system would serve as basis for the policy directions to be undertaken by the BSP in terms of money, banking and credit and would assist it in the maintenance of monetary and financial stability in the country.

Sec. 3. Definition of Terms. - For purposes of this Act:

(a) "Accessing Entity" refers to any submitting entity or any other entity authorized by the BSP to access credit data from the BSP. (b) "Borrower" refers to a natural or juridical person, including any local government unit (LGU), its subsidiaries and affiliates that applies for and/or avails of a credit facility. (c) "BSP" refers to the Bangko Sentral ng Pilipinas, created under Republic Act 12 No. 7653, as amended. (d) "CIC" refers to the Credit Information Corporation. (e) "Credit Data" refers to positive and negative information provided by a Borrower to a submitting entity in connection with the application for and availment 16 of a credit facility and any information on the Borrower's creditworthiness in the possession of the submitting entity and other factual and objective information related or relevant thereto in the submitting entity's data files or that of other sources of information; Provided, That in the absence of a written waiver duly accomplished by the Borrower, credit data shall exclude confidential information on bank deposits and/or clients funds under Republic Act No. 1405 or the "Law on Secrecy of Bank Deposits", Republic Act No. 6426 or "The Foreign Currency Deposit Act", Republic Act 23 No. 8791 or "The General Banking Law of 2000", Republic Act No. 8367 or the "Revised Non-Stock Savings and Loan Association Act of 1997", Republic Act No. 3844 or the "Agricultural Land Reform Code", ', Executive Order No. 81, Series of 1986, as amended by Republic Act No. 8523 or "The Revised Charter of the Development Bank of the Philippines", Republic Act No. 7353 or "An Act Providing for the Creation, Organization 28 and Operation of Rural Banks and for Other Purposes" , as amended and Republic Act No.7906 or the "Thrift Banks Act of 1995". (f) "Credit Facility" refers to any loan, credit line, guarantee, or any other form 31 of financial accommodation from a submitting entity; Provided, That for purposes of

1 this Act, deposits in banks shall not be considered a credit facility extended by the 2 depositor in favor of the bank. (g) "Credit Rating" refers to an opinion regarding the creditworthiness of a Borrower or of an issuer of debt security, using an established and defined ranking system. (h) "Credit Report" refers to a summary of consolidated and evaluated information on creditworthiness, credit standing, credit capacity, character and 8 general reputation of a Borrower; (i) "Government Lending Institutions" refers to government financial 10 institutions (GFls) and government-owned and controlled corporations (GOCCS) 11 primarily engaged in lending activities. (i) "Governor" refers to the Governor of the BSP. (k) "MonetaryBoard" refers to the Monetary Board of the BSP. (I) "Negative Credit Information" refers to information/data concerning the poor credit performance of Borrowers such as, but not limited to, defaults on loans, adverse court judgments relating to debts, and reports on bankruptcy, insolvency, petitions or orders on suspension of payments and corporate rehabilitation. (m) "Non-Accessing Entity" refers to an entity other than a Submitting Entity, Special Accessing Entity or Borrower that is authorized by the BSP to access credit data from a Special Accessing Entity. (n) "Outsource Entity" refers to any accredited third-party provider to whom the BSP may outsource the processing and consolidation of credit data pertaining to a Borrower or issuer of debt or convertible securities under such qualifications, criteria and strict confidentiality guidelines that BSP shall prescribe and duly publish; Provided, that an Outsource Entity or any of its affiliates, shall neither be an Accessing Entity nor a Special Accessing Entity. (o) "Positive Credit Information" refers to information/data concerning the credit performance of a Borrower, such as, but not limited to, information on timely repayments or non-delinquency. (P) "Relevant Government Agencies" refers to the Securities and Exchange Commission, Department of Finance, Department of Trade and Industry, Insurance Commission, and the Cooperative Development Authority.

(q) "Special Accessing Entity" refers to a duly accredited private corporation engaged primarily in the business of providing credit reports, ratings and other similar credit information products and services. (r) "Submitting Entity" refers to any entity that provides credit facilities such as, but not limited to, banks, quasi-banks, trust entities, non-stock savings and loan investment financing companies, associations, houses, cooperatives, nongovernmental, micro-financing organizations, credit card companies, insurance companies, and government lending institutions. Submitting Entities shall also refer to entities that have information relevant to establish the creditworthiness of Borrowers, such as, but not limited to, credit collection agencies and utility service providers. (s) "Transition Team" refers to the team consisting of the CIC personnel chosen by the BSP to facilitate and assist in the transfer of the CIC functions and control over the credit information system to the BSP.

Sec. 4. Abolition of the Credit Information Corporation. - The CIC created by

virtue of Republic Act No. 9510 or the "Credit Information System Act" is hereby 16 abolished. All positions in CIC are considered abolished; Provided, That pursuant to

Section 5 of this Act, CIC shall retain personnel relevant in assisting in the liquidation

and undertaking of other residual tasks, such as administration and maintenance of records, resolution of pending legal issues and disputes, and settlement of outstanding obligations with respect to CIC's service contracts. The emoluments of the retained personnel shall be provided by CIC in accordance with relevant rules and regulations of the Governance Commission for Government-Owned or -Controlled Corporations (GCG); Provided, further, that the retained personnel shall also be entitled to separation incentive pay upon completion of their assigned tasks in accordance with

Section 6 of this Act.

Sec. 5. Liquidation of Assets and Liabilities and Disposition of Shareholdings in

CIC. - The GCG, in accordance with existing laws and regulations, shall be responsible for the liquidation of assets and disposition of shareholdings of the CIC: Provided, That the liquidation of the assets and liabilities shall not exceed five (5) years from the effectivity of this Act: Provided, further, That any asset or liabilities that may be transferred to the BSP is subject to the approval of the Monetary Board: Provided,

1 finally, That if upon liquidation of the CIC it is determined that the value per share is less than par as when initially invested by shareholders, the BSP shall reimburse them 3 in an amount not exceeding their initial investment.

Sec. 6. Grant of Separation Incentive Pay to Affected Officers and Employees.

5 - The CIC shall be authorized to grant a separation incentive pay (SIP) to affected officers and employees holding permanent positions with the following rates: Government Service Rates First 20 years 1.00 x (Monthly Basic Salary) x No. of Years 20 years and 1 day to 30 years 1.25 x MBS x No. of Years 30 years and 1 day and above 1.50 x MBS x No. of Years The SIP authorized herein shall be charged against the available corporate funds of the CIC and such other funding sources that the Department of Budget and Management may identify, subject to existing budgeting, accounting and auditing laws, rules, and regulations.

Sec. 7. Transfer of Functions of the CIC to the BSP. - All powers, duties, and

functions vested by law in the CIC not inconsistent with the provisions of this Act shall be deemed transferred to the BSP. All credit data received and consolidated by the CIC pursuant to Republic Act No. 9510 and the credit information system are hereby transferred to the BSP. The BSP shall create a Transition Team from the employees of the CIC to facilitate and assist in the transfer of the CIC functions and control over the credit information system to the BSP. The emoluments of the members of the Transition Team shall be provided by the BSP, subject to applicable laws, rules, and regulations.

Sec. 8. Powers and Functions. - In furtherance of the policy set forth in Section

2 and in view of the transfer of the functions of the CIC to the BSP under Section 7 of this Act, the BSP shall have the following powers and functions: (a) To compel all Submitting Entities to submit to the BSP all credit data that tends to update and/or correct the credit status of Borrowers on a regular basis; (b) To include other entities that have information relevant to establish the creditworthiness of Borrowers to be subject to compulsory participation, in accordance with such standards and rules that the BSP may prescribe;

(c) To use the collected credit data of Borrowers to correct/update the credit 2 status of said Borrowers in the credit information system; (d) To have unrestricted access to credit and other relevant information from government offices, judicial and administrative tribunals, prosecutorial agencies, and 5 other related offices, as well as pension plans and other retirement funds administered by the government. GOCCs and private entities; (e) To release credit data on the Borrower, subject to the provisions of Section 10 of this Act; and (f) To accredit Accessing Entities, Special Accessing Entities, and Outsource 10 Entities in accordance with such rules and regulations as the BSP may prescribe for 11 authorizing access to BSP's credit information system.

Sec. 9. Borrower's Rights. - Borrowers shall have the following rights under this

13 Act: (a) To be notified of the Submitting Entity's obligation to submit the Borrower's credit data to BSP and the disclosure thereof to the BSP, subject to the provisions of this Act and its implementing rules and regulations; (b) To know the causes of refusal of the application for credit facilities or services from a financial institution that uses the credit data as basis or ground for such a refusal; (c) To have ready and immediate access to one's own credit data. In case of erroneous, incomplete, or misleading credit data, the subject Borrower shall have the right to dispute the erroneous, incomplete, outdated, or misleading credit data before the BSP, which shall investigate and verify the disputed information. Disputed information shall be updated or corrected after the investigation and verification. The Borrower and the Accessing Entities and Special Accessing Entities who have received such information shall be informed of the corresponding update or correction within five (5) working days from the date the BSP conclusively resolves the update or correction of the information. For this purpose, the BSP shall use a simplified dispute resolution process to fast-track the settlement or resolution of disputed credit data; (d) To access their own credit data free of charge, subject to the rules and regulations prescribed by the BSP; and

(e) To have negative information in the Borrower's files corrected and updated 2 within the period prescribed by the BSP from the time of payment, liquidation, or settlement of debts. Negative information on the Borrower shall stay in the database of the BSP, unless sooner corrected, for a period prescribed by the BSP.

Sec. 10. Confidentiality of Credit Data. - The BSP, Submitting Entities,

6 Accessing Entities, Outsource Entities, Special Accessing Entities, and duly authorized Non-Accessing Entities shall hold credit data under strict confidentiality and shall use 8 the same only for the declared purpose of establishing the creditworthiness of the 9 Borrower. Outsource Entities are absolutely prohibited from releasing such data 10 received from the BSP other than to the BSP. The BSP shall be authorized to release and disclose credit data only to 12 Accessing Entities, Special Accessing Entities, Outsource Entities, and Borrowers. Credit data released to Accessing Entities shall be limited to those pertaining to existing Borrowers or Borrowers with pending credit applications. Credit data shall not be released to entities other than those enumerated under this Section, except upon order of the court upon prior approval of the Governor and/or his delegated officer. The BSP shall be held free and harmless from any liability, claim, or legal action arising from the use, release, or disclosure of data made in good faith in accordance with this Act and its implementing rules and regulations. This protection shall extend to its officers and employees acting within the scope of their official duties, except in cases of gross negligence, willful misconduct, or unauthorized disclosure of confidential or restricted information. The accreditation of an Accessing Entity, Special Accessing Entity, and/or Outsource Entity that violates the confidentiality of, or misuses credit data accessed from the BSP may be suspended or revoked. Any entity that violates this Section may be barred access to the credit information system and penalized pursuant to Sections 13 and 14 of this Act. Special Accessing Entities are prohibited from releasing credit data received from the BSP or credit reports and ratings derived from the data received from the BSP to Non-Accessing Entities unless the written consent or authorization has been obtained from the Borrower, subject to the terms and conditions prescribed by the BSP; Provided, That in case the borrower is a LGU or a subsidiary or affiliate of a

1 Special Accessing Entity, the Special Accessing Entity may release credit data on the LGU or its subsidiary or affiliate upon written request and payment of reasonable fees 3 by a constituent of the concerned LGU.

Sec. 11. Submission of Credit Data to the BSP. - Pursuant to Section 8 of this

5 Act, all Submitting Entities are hereby directed to submit credit data to the BSP 6 pursuant to its prescribed rules and regulations; Provided, That non-compliance of this 7 directive shall be subject to the sanctions provided under Sections 13 and 14 of this 8 Act.

Sec. 12. Accessing Credit Data. - Accessing Entities, Special Accessing Entities,

10 and Outsource Entities when utilizing the credit information system, are required to 11 adhere strictly to the standards, rules, and regulations prescribed by the BSP. All 12 Accessing Entities, Special Accessing Entities, and Outsource Entities shall ensure that their use of credit data is compliant with the data protection policies, confidentiality requirements, and other regulatory provisions set by the BSP and other relevant laws; Provided, That any misuse, unauthorized access, or violation of these regulations shall 16 be subject to the penalties provided under Sections 13 and 14 of this Act. Fees related to access of credit data by Accessing Entities and Special Accessing Entities shall be provided for by the BSP in accordance with its rules and regulations.

Sec. 13. Administrative Sanctions. - The Monetary Board or the Governor may

impose applicable administrative sanctions upon any Submitting Entity, Accessing Entity, Special Accessing Entity, or Outsource Entity, and/or their directors, officers, or employees, for any of the following violations: (1) Non-submission of reports, delay, and/or erroneous reporting; (2) Willful making of a false or misleading statement; (3) Submission of a false or misleading document to the BSP; (4) Non-performance of other obligations provided under this Act: or (5) Willful failure or refusal to comply with, or violation of, any order, instruction, rule, or regulation issued by the Monetary Board, or any order, instruction, or ruling by the Governor. The following administrative sanctions shall be imposed, whenever applicable: (a) Fines in amounts as may be determined by the Monetary Board to be appropriate, but in no case to exceed One million pesos (Php1,000,000.00) for each

transactional violation, or in the case of a continuing offense, One hundred thousand pesos (Php100,000.00) per calendar day, taking into consideration the attendant circumstances, such as the nature and gravity of the violation or irregularity and the size of the institution: Provided, That the Governor is hereby authorized, at his discretion, to impose fines not in excess of One hundred thousand pesos (Php100,000.00) for each transactional violation or in the case of a continuing offense, 7 Thirty thousand pesos (Php30,000.00) per calendar day, which shall be final and 8 executory until reversed, modified, or lifted by the Monetary Board on appeal; and/or (b) Suspension of privileges or access to the credit information system or any BSP credit database as may be determined by the Governor.

Sec. 14. Penal Sanctions. - Any person who willfully violates any of the

provisions of this Act or the rules and regulations promulgated by the BSP pursuant to any of the provisions of this Act shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (Php50,000.00) but not more than Two million pesos (PhP2,000,000.00) or imprisonment of not less than two (2) year nor more than ten (10) years, or both, at the discretion of the court.

Sec. 15. Implementing Rules and Regulations. - The BSP shall promulgate the

rules and regulations for the effective implementation of this Act within one hundred eighty (180) days from its effectivity.

Sec. 16. Transitory Clause. - Nothing in this Act shall operate to affect the

validity or legality of any right, duty, or obligation created by or in respect of the CIC prior to the effectivity this Act. Pursuant to Section 7 of this Act, the BSP and the CIC shall finalize within three (3) months from the effectivity of this Act the transitional arrangements for the transfer of the CIC functions and control of its credit information system operations to the BSP. Such transition period may be extended as mutually agreed upon by the CIC and the BSP to a period not exceeding another three (3) months.

Sec. 17. Funding. - Upon the completion of the transfer to the BSP of the CICs

functions, all credit data, the credit information system, and the costs to operate the 30 credit information system shall be provided by the BSP.

Sec. 18. Separability Clause. - If any provision of this Act is declared invalid or

unconstitutional, the remainder thereof not otherwise affected shall remain in full force and effect.

Sec. 19. Repealing Clause. - Republic Act No. 9510 is hereby repealed by this

5 Act. All other laws, executive orders, rules and regulations, or parts thereof inconsistent with any provision hereof are hereby repealed or modified accordingly.

Sec. 20. Effectivity. - This Act shall take effect fifteen days (15) after its

publication in the Official Gazette or in a national newspaper of general circulation. Approved,