December 5, 2009


By Abu Bakar Munir and Siti Hajar Mohd. Yasin

Three weeks ago, on 18 November 2009, the Malaysian Parliament tabled for the first reading, the Credit Reference Agencies Bill (CRAB). According to its explanatory statement, the proposed law seeks to provide for the registration and regulations of persons carrying on a credit reporting business that involves the processing of credit information. The Malaysian Bar in its response states, “The long-standing issue of people being wrongly blacklisted by banks due to inaccurate information given by credit reporting agencies, such as Credit Tip Off Services Sdn. Bhd. ( CTOS) is finally being addressed”.

While the effort to introduce the law is commendable, the law, in our opinion is in a mess. The CRAB adopted the New Zealand Credit Reporting Privacy Code 2004 which is established under the Privacy Act 1993. Some of the provisions of the CRAB were taken directly from the New Zealand Code (NZC) with and without modifications.

The definition of credit information in the CRAB is from the NZC with a longer list of information and it includes information about business and companies. This means that a credit reference agency can collect information about companies to be sold to the credit providers. We believe that the definition is overly prescriptive. Sensibly, the definition to be adopted should be open and principles based. We submit that a better definition is something like, “Credit information means any information that is being or has been prepared by a credit reporting agency that has any bearing on an individual’s eligibility to be provided with credit or capacity to repay credit and is used, has been used, or has the capacity to be used for the purpose of serving as a factor of an individual’s eligibility for credit”. (see Veda Advantage, submission to the Australian Law Reform Commission, Issues Paper 32 – Credit Reporting, March 2007).

The provisions of the CRAB in clause 22 provide some basic principles on the collection of credit information. In subsection (1) it provides that no credit reference agency shall collect any credit information about a customer unless: (1) it is collected for a specific and lawful purpose directly related to an activity of the credit reporting agency; (2) the collection is necessary for or directly related to that purpose; and (3) the credit information is adequate but not excessive in relation to that purpose. Clause 22 (3) of the proposed law has a far-reaching implication on the consumers in Malaysia. It provides, “the collection and use of credit information by a credit reporting agency under subsection (1) shall not require the consent of the customer concerned”. In contrast, the NZC provides that “Where a credit reporter collects credit information, it must collect the information directly from the individual concerned.”

Clause 23 (1) of the CRAB requires the credit reference agency to provide a notice to the customer on the processing of credit information. The provision lists out what a credit reference agency is required to do if they collect information from an individual. This is ironic. A consent to collect the information from an individual is not needed, yet the credit reference agency is required to provide a notice with some prescriptive requirements and details. Similarly, under clause 24, a credit reference agency is required to have the consent of the customer before disclosing the information for any purpose or to any person.

The CRAB adopts the NZC concept of Summary of Rights. For an example, the written notice to be sent to a customer must contain a summary of the customer’s right. These rights are established by the Summary of Rights. In New Zealand, this Summary of Rights is established and derived from the Code. Ironically, in Malaysia, the Summary of Rights, as provided for under clause 2 is to be determined by the Registrar, the enforcement authority of the law. Can rights be created by the executive?

The Bill is available HERE

A more comprehensive analysis will be made available soon.

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