[Collections & Credit Risk - Table of Contents] August 2001

Lending Abroad: The Credit Concept Spreads

Increasingly, informed lending, backed by meaningful credit reporting, is viewed as key for jump-starting under-developed economies. How are local bureaus doing at clearing the hurdles to establishing useful credit reporting systems?

By Kate Gibson

The "buy-now, pay-later" approach that helps fuel the U.S. economy would not fly in many regions overseas, including portions of Eastern Europe, Asia, and the Middle East, where transactions are conducted in a dramatically different fashion. In Jordan, for instance, obtaining a bank loan can hinge on a person's last name - a family's reputation and standing in the community is considered ahead of payment history and other factors. In China's capital, Beijing shoppers await the delivery of refrigerators from area department stores only after paying the total price in advance.

In Rumania and Poland, World Bank officials found banks that do not bother to retain files on credit applications. "They don't keep the paperwork - they throw everything away," says Norm Magnuson, spokesman for Associated Credit Bureaus Inc., an industry trade group based in Washington, D.C.

Depending on the region, laws, and culture, obtaining information on the credit worthiness of an individual or business is frequently a haphazard business. Privacy issues are of far greater concern in Europe and elsewhere than in the United States. Even in countries with advanced credit reporting systems, the information gathered varies, with many countries restricting the type of credit information that can be legally gathered. Australia, for instance, only allows the compilation of negative, as opposed to both positive and negative, information. However, the country's "extremely stringent" privacy laws are under review, says Neil Wood, group managing director for Total Credit Management Services Pty Ltd., established in Victoria, Australia in 1977.

Consumer Credit Data Restrictions
While there are no restrictions on the data collected on commercial accounts, there is ongoing debate about consumer information, as well as its ownership. "The banks in Australia introduced in their service provider contracts several years ago conditions whereby the data is always theirs," Wood explains. "However, where there is no stipulation in contractual law for this provision, then the data can belong to the bureau."

Making matters even more confusing "is a strong argument in relation to consumers now that may be encapsulated in law, to say that the subject of the data may themselves own it, and unless they grant authority for such data to be used then it may not be used," Wood says. Consumer protection laws have "altered drastically in favor of the consumer in the past 10 years in Australia," says Wood, with processes such as skip tracing becoming more difficult. Previously public record databases, such as electoral rolls and motor vehicle registration information, are no longer viewed as part of the public record.

In South Korea, the restrictions are less harsh, but the data gathered is by no means as extensive as in the U.S.. "Many credit grantors contribute negative data," says Yoonkyung Noh, an assistant manager with the credit information team at Korea Information Service, a credit reporting company based in Seoul.

KIS sells commercial and consumer credit data to credit grantors, including financial institutions. "Our database includes positive data to a degree, by which I mean credit account opening and closing information," says Noh, who adds that credit reporting in South Korea currently does not include payment performance data. However, "the credit-related market is changing and growing at a significant rate and the demand for positive data is increasing just as much," she adds.

Until recent years, South Korean lenders would reject or approve credit applicants in "a very traditional way - manually, using information gathered from applicants themselves with a certificate or official papers," Noh says.

Russian Roulette?
Ongoing efforts to set up credit reporting systems in several Russian cities face even bigger stumbling blocks - laws that ban outright the exchange of information between banks and third parties.

The situation is changing, however, as towns and cities in countries around the globe look to jump-start their economies. Some are steered, others are pushed, into adopting radical change, with pressure coming from regional bankers associations as well as the U.S. Agency for International Development, the World Bank, and other agencies that fund economic growth initiatives in underdeveloped markets.

Without consumer credit reporting systems, in some countries banks unknowingly extend credit to customers already in default with the same institution or make loans to people overextended elsewhere. In helping lift some of the world's emerging markets to their feet, credit reporting is viewed as an important and elementary piece of the lending infrastructure, industry officials say. "The World Bank has been instrumental in encouraging emerging market countries to adopt a credit economy based on a meaningful credit reporting infrastructure," D. Barry Connelly, president of the ACB, declared at a November gathering held in Shanghai and cosponsored by the city's finance society.

Demand for credit reports is "rising across the Asian Pacific region in both consumer and commercial areas," echoes TCM's Wood.

With major U.S. credit bureaus active abroad (CCR, July 2001) and roughly 100 foreign-based credit reporting bureaus already in place, global activity in the credit reporting arena has stepped up markedly during the past two to three years, U.S. industry observers say. "We get two to three inquiries a month from foreign countries asking for basic information on credit reporting," the ACB's Magnuson says.

In recent years, the ACB, which counts 30 international credit bureaus among its primarily U.S.-based membership, has held global credit reporting conferences with its overseas counterpart, the European Association of Consumer Credit Information Suppliers, or ACCIS, a Dublin, Ireland-based trade association of 20 credit agencies in 14 European countries.

"Most emerging economies in the international market are looking at credit bureaus to give their economies a boost," says Larry Ulrich of LDU Enterprise, a former credit bureau and collections agency owner who found his telephone ringing steadily with overseas calls after he attempted retirement in 1999. The Toledo, Ohio-based credit and collections consultant has since found himself traveling to Russia and Jordan, both of which are vying, with varying degrees of success, to lay the foundations for economic growth via a credit economy.

"It is only now that banks from the U.S. or Europe are looking for new markets to get into the retail [consumer] side of the business," says Ulrich. "The local banks are saying 'Whoa, we don't have retail credit, we better figure this out before the competition comes in.'" But for many regions, the consultant adds, "there are a myriad of issues - legal and cultural - that need to be resolved before the big guys get involved."

In Jordan, Ulrich says credit cards are unheard of among most of the kingdom's population of roughly 4 million, with only the upper-class carrying plastic. Even then, an American bank issues that plastic, and its use is limited, with credit cards typically accepted only at hotels and similar establishments that cater to an international clientele.

Unlike Russia, where efforts to create credit bureaus in such cities as St. Petersburg and Moscow are barely off the ground, the Jordanian situation will likely change rapidly, Ulrich predicts. The kingdom's parliament is expected to quickly adopt a proposed law akin to the Fair Credit Reporting Act that governs consumer credit reporting in the United States. The law would overturn Jordan's present rule that makes the sharing of credit information a criminal offense, and likely lead to the establishment of a credit bureau within a year, Ulrich says. "They want to be the credit bureau of the Middle East," he says of the Jordanian effort.

Despite any regional aspirations, setting up credit reporting systems is initially a local issue, following the U.S. pattern, which had local banks and retail stores establishing credit bureaus in nearly every town after World War II. "The local bank, local department store, local credit bureau could all function on behalf of the citizens of that city. That is the way it appears the system is developing in China," the ACB's Connelly said in his address in Shanghai. "If you have not experienced the centralization of credit grantors nationally, it is only logical that you would begin locally," Connelly said, pointing to systems developing in three Chinese cities: Shanghai, Beijing, and Dalian.

Much further along - and exhibiting traits similar to the U.S. system - is Japan's credit market and credit reporting process. Three kinds of credit reporting agencies have existed since the early 1970s in Japan: the first affiliated with banks, the second with consumer finance firms, and the third with credit granting companies.

While Japan has no specific laws to control consumer credit reporting, voluntary regulations call for the information to be used only to determine creditworthiness, and not for such purposes as employment and business activities.

On a less positive note, Japan's mature credit market has seen an increase in personal bankruptcies. More than 70,000 Japanese consumers filed bankruptcy in 1997, the highest number in the nation's history, according to Japan Information Center Corp.

That's an aspect that credit officials in countries with less developed credit systems should strive not to emulate.

Overseas Credit Bureaus
(A selected list in alphabetical order)
Company Headquarters Phone/Fax E-mail/Website Primary Market(s) Description
Advancing Trade srl Via Palma il Vecchio 111 I-24122 Bergamo, Italy 39 035-4161011 / 39 035 234 338 N.A./
Italy Commercial collections
AGA Information Ltd. 7/F, E. Wing, Sincere Insurance Building, 4-6 Hennessy Rd. Wan Chai, Hong Kong 852 2866 6438 / 852 2866 0816 N.A./
China Credit information and receivables management services to local and overseas corporations
Anorbis Uluslararasi Bilgi Servisi Danismanlik ve Ticaret Ltd. Sti. Akarsu Caddesi No:32 Cihangir, Taksim, 80060 Istanbul, Turkey 90 212 252 88 38 or 90 212 243 03 23 / 90 212 243 67 82 Anorbis@superonline.com /
Turkey Commercial credit information
Business & Search Information Services Sdn Bhd Suite 303-305, Wisma Singapore Airlines, No 2-4, Jalan Dang Wangi, 50100, Kuala Lumpur, Malaysia 03-291-5218 / 03-291-5281 Info@basis.com.my /
Malaysia and Singapore Search and credit information services
Byington Colombia S.A. Apartado Aéreo 33188 Bogotá, Colombia 571 3100200 / 571 3456636 info@byington.net /
Colombia Credit information on Colombian companies and collections
Canadian Credit Reporting Ltd. 200 Consumers Rd., Suite 406 Toronto,Ontario M2J 4R4 Canada 800-567-4602 or 416-499-9936 / 416-499-9703 order@canadiancredit.com /
Canada Commercial and consumer credit reports throughout Canada and the United States
China Credit Information Service Ltd. 5F, No. 57, Tung Hsin Rd. Taipei, Taiwan 886-2-8768-3266 / 886-2-8768-2003 sales@poffice.ccis.com.tw /
Taiwan, Hong Kong, China Credit information in Hong Kong and the People's Republic of China
Credit Reference Bureau Ltd. General Mathenge Dr., Westlands, P.O. Box 46406 Nairobi, Kenya 254-2-580671 or 254-2-580163 / 254-2-580927 info@crbkenya.com /
Kenya Corporate and consumer payment performance information and debt collection services
Credit Report S.A. Capac Yupanqui 2434 Lima 14 Lima, Peru 511-421-3661 or 511-212-5181 / 511-421-1565 credit.report@terra.com.pe /
Latin America Credit evaluations of Latin American companies
Credita AG Bahnhofstrasse 22 6403 Küssnacht am Rigi Switzerland 41-41-854-40-45 / 41-41-850-17-07 info@credita.ch /
Austr., Germany, Liechtenstein, and Switzerland Provides credit, debt, fiduciary, legal, and economic information services.
CreditInform a.s. Sørkedalsveien 10C Pb. 5275 Majorstua 0303 Oslo, Norway 47-22-93-20-00 / 47-22-46-53-90 kundeservice@credit-inform.no /
http:// www.creditinform.no
Norway Supplies commercial and consumer information, financial models, and analyses for credit rating
Verband der Vereine Creditreform e.V. Hellersbergstrasse 12 41460 Neuss Germany 49-2131-109 0 / 49-2131-109-8000 international.service@- creditreform.de /
Germany, Austr., Switz., East and West Europe Creditreform provides company infor- mation, accounts receivable manage- ment, and marketing services.
Creditringen A/S Nørre Søgade 27 A DK-1370 Copenhagen, Denmark 45-33-12-10-30 / 45- 33-12-00-80 torben.brodthagen@creditringen.dk /
Denmark, Sweden, and Norway Part of Nordic KredittPartner Holding AS. Holds collections authority from Danish Dept. of Justice.
CreditSafe Holding ASA Trondheimsveien 184 0503 Oslo, Norway 47-22 09 68 80 / 47-22 09 68 90 info@creditsafe.com /
Norway, Sweden, and UK Internet-based supplier of credit information
CRIF via Lame, 15 - 40122 Bologna, Italy 39 051 6431411 / 39 051 221865 info@crifgroup.com /
Italy Credit reporting and decision support systems for retail credit markets
Debt Management Service Pty Ltd. Level 2, 13-15 Myrtle St., Crows Nest New South Wales 2065, Australia 612-9954-9588 / 612-9954-3261 reports@dmsgroup.net /
Australia, New Zealand, Pacific Rim countries Part of Debt Management Group. Provides credit information and personnel recruitment services.
Dimensione Rome, Italy 06-88-668-210 / N.A. dimensione@dimensione.it /
Italy Provides credit information on more than 500,000 enterprises
Esazioni Dirette Internazionali srl (EDI) Via le A. Ciamarra, 260, 00173 Rome, Italy 06-72-22-182 / 06-72-18-140 ediroma@tin.it /
Italy Provides national and international credit and collections services.
Estimo Reports S.r.l Via Fapanni 8 - 31100 Treviso (TV), Italy 39-04-22-42-42-42 / 39-04-22-42-39-99 estimo@tin.it /
Italy Credit reports, balance sheet analyses, and commercial information
Etticsch-Enchelmaier GmbH Bodelschwinghstr. 9 67246 Dirmstein, Germany 62-38-98-9098 / 62-38-98-9099 Ettisch-EnchelmaierGmbH @t-online.de /
Germany Investigative and commercial reporting services such as claim and fraud investigation, credit reports on firms and individuals, and market research.
Euro DB Place de l'Université 16 1348 Louvain-la-Neuve, Belguim 32-10-47-6771 / 32-10-47-6767 sales@eurodb.be /
Belgium Specializes in official and legal information on companies in Belgium
Suomen Asiakastieto Oy (Finska) Työpajankatu 10A, 6th floor -00580, Helsinki, Finland 358-1488 6530 / 358-753-3231 international@asiakastieto.fi /
Finland Credit information. Owned by Finnish industry and financial institutions
U.K. Credit Reports Online (First Report Ltd.) 42-44 Carter Ln. London, EC4V 5EA, UK 020-7329-1855 / N.A. N.A./
Eng., Scotland, and Wales Part of the First Report group. Online U.K. credit information and collections
Fletcher & Collins Ltd. Centre House, 79 Chichester St., Belfast, BT1 4JE, Ireland 44 2890 559999 or 44 2890 559559/ 44 2890 550072 N.A./
Republic of Ireland Business information and debt collection services throughout Ireland and the UK.
International Collection Services Noorderlaan 98 bus 29 B - 2030 Antwerpen, Belgium 32-3-542.31.53 / 32-3-542.33.17 Info@icservices.be /
Belgium, Netherlands, Luxembourg A division of J.V.L. Services BVBA. Provides commercial credit information and collections services.
IGK Intercredit Business Information Holding GmbH Koblenzer Strasse 28 53173 Bonn, Germany 49 228 37 29 120/ 49 228 37 29 121 N.A./
All countries formerly part of the USSR Operates a network of companies, franchise offices, and partners in all regions of the former USSR.
Intercredit Group Intercredit Information Holding, Zelinkagasse 10 A-1010 Vienna, Austria 43-1-534 84 709 / 43-1-533 56 05 office@intercredit.at /
Austria, Russia, and Eastern Europe Provides data on companies throughout the world with a special focus on Central and Eastern Europe.
MEMRB International P.O. Box 2098 1504 Nicosia, Cyprus 357-286-6000 / 357-233-2533 info@memrb.com /
Egypt, Greece, Jordan, Syria, Saudi Arabia Network of offices spanning Eastern and Central Europe, Middle East, North Africa, and Eastern Mediterranean
Mope Informação Para Gestão De Empresas, S.A. Rua de Santa Marta, 43 E/F 5° - 1150-293 Lisboa, Portugal 21 358 88 00 / 21 358 88 00 geral@mope.pt www.mope.pt /
Cape Verde, Portugal Provides commercial credit information and collections services
Ofincur S.R.L. Pilar Costa 156, 11900Z Montevideo, Uruguay 598 (2)3081066 / 598 (2)3098754 intl@ofincur.com/
Uruguay and all of South America Provides credit reports for risk assessment on companies and individuals throughout South America
Serasa Rua Jose Bonifacio 367 Centro Sao Paulo, Brasil CEP 01003-905 55 11 3150 0100 / N.A. N.A./
Brazil Credit information on some 8.9 million businesses in Brazil and all Brazilian consumers
La Société Coface Scrl 5, Alfred de Vigny - 75008 Paris, France 01 42 12 23 45 / 01 42 12 23 10 N.A./
http://www.scrl.fr axetudes@scrl.fr
France Financial and commercial information on over 4 million enterprises through 13 regional facilities
Sinotrust Business Risk Management Ltd. 2/F., Jing An Center, 8 Beisanhuan Donglu, Beijing 100028, Peoples Republic of China 86 10 64606868 / 86 10 64680139 credit4@sinotrust.com.cn /
People's Republic of China Headquartered in Beijing, Sinotrust has subsidiaries in Shanghai, Guangzhou, and Hong Kong
TCM Group International Ltd. The Grange 1 Hoole Rd. Chester, CH2 3NQ- United Kingdom 44 1244 319912 / 44 1224 314635 tcmgroup@regency.unet. com /
Australia plus 49 other countries A global consortium providing credit management and debt collection services.
Tokyo Shoko Research Ltd. Shin-ichi Bldg., 1-9-6, Shinbashi, Minato-ku Tokyo 105-0004, Japan 81 33 233 2611 / 81 33 233 2617 yasushi.ishitobi@tsr-net.co.jp /
Japan Provides credit, marketing, and financial research, as well as business information and bankruptcy reports.
Veritas, Italy via della Fortezza, 7 Florence, Italy 055 4630490/ 055 4630498 infoestero@veritas.it /
Italy Provides commercial information and investigation services.

[Subscribe Now!]