Hong Kong Banks Close To Credit Data Sharing Deal

by Mary Swire, Tax-News.com, Hong Kong

25 June 2002

Last January, the Hong Kong Association of Banks proposed a change to privacy laws which would allow banks to share data on individuals who had defaulted on loan repayments, but was resisted both by the government and by private sector organisations opposed to wider sharing of personal information. This week, there is to be a further meeting between the banks and legislators to try to reach a compromise on a package of 'credit sharing' relaxations.

The banks are motivated by rising levels of credit card default, which has recently been increasing at 10% a year, and proposed to swap credit card details, the level of unsecured loans used, credit limits and repayment patterns. At first, the banks also proposed to share information on mortgage debt, even if it wasn't delinquent, but this aspect of the plan was dropped under pressure from the government.

Democratic Party legislators still oppose the plan; the party's financial affairs spokesman, Sin Chung-kai says that if the banks ran their businesses more prudently, they would not need so much personal information from their clients. "But we are quite happy to discuss the proposal with the banks," he said.

Hong Kong has a Privacy Code, looked after by a Privacy Commissioner, and the banks had been demanding changes to the privacy code which would allow them to share more information about their customers. After discussions between the banks and the Commissioner, terms have now been agreed that would allow banks to access information about how many other credit cards a customer held and their outstanding balances - but the banks would be required to obtain a credit-card applicant's approval before accessing their credit information.

The Democrats believe banks promoted credit cards too aggressively and more responsible marketing would solve the bad-debt problem. The banks, on the other hand, argue that credit data sharing was necessary to allow bank managers to evaluate client risk. "If banks could get more positive information, it would alert them that individual clients may have already borrowed too much from other banks and stop a card being issued to them," says a bank spokesman. Experience in the United States experience suggests that once an information sharing system has been implemented, banks could easily assess clients with good repayment records.

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