Parliament Considers Comprehensive Credit Information System
Parliament Considers Comprehensive Credit Information System
Contributed by Gárdos, Füredi, Mosonyi, Tomori
December 12 2008
Hungary's central credit information system was established in 1995. It is operated by a private limited company owned by the main commercial banks. All financial service providers - including banks, brokerage companies and leasing companies - are required to submit data to the system, which provides them with data in return.
Consumer credit operations did not become widespread until the late 1990s and the system did not contain data relating to natural persons until 1998. The scope and amount of information in the system have grown, but whereas the system has always contained comprehensive information on companies, it holds only 'negative' information (eg, credit default information) on natural persons.
The system now holds data on all companies that have entered into a financial agreement (ie, a loan agreement, an investment credit or securities lending contract or another form of financial service agreement), and data on natural persons who:
- have failed to meet repayment obligations under a financial agreement (if the default amount is above a certain threshold);
- have provided false data when concluding a financial agreement; or
- have committed credit card fraud.
Hungary's consumer credit sector has grown rapidly in the 21st century. In 2007 the ratio of indebtedness to household disposable income reached 51% and the debt service ratio peaked at 13%.(1) The need for a comprehensive credit information system became clear: the existing system does not provide enough information for adequate risk assessments and thus provides insufficient protection against the risks arising from growing household indebtedness.
A programme for a comprehensive system was initiated in 2002. The aim was to include the same type of information for natural persons as for companies (ie, positive as well as negative information). This suggestion attracted severe criticism. The data protection ombudsman was not alone in considering that such a change would significantly affect personal data protection rights while offering no real public benefit. Many people have argued that personal data processing on the scale envisaged would make the system unconstitutional.
However, the recent financial crisis has reignited the debate and has shown the potential danger of household indebtedness, demonstrating that measures which help to keep it well regulated and transparent are in the public interest and justify a greater restriction of personal data protection rights.(2)If Parliament adopts the bill, the new system will contain comprehensive information on all natural persons who have entered into a financial agreement, provided that the person in question gives his or her express consent. If consent is withheld, the system will contain only basic data and will record the fact that the data subject refused to give his or her consent. In theory, the provision of comprehensive data on natural persons to financial service providers would be voluntary; in practice, the voluntary nature of such data provision may be illusory, since financial service providers would probably apply stricter conditions in assessing potential customers who refuse to disclose data. Therefore, Parliament must weigh the importance of a comprehensive central credit information system against the resulting restriction of data protection rights.
For further information on this topic please contact Zsuzsa Elek at Gárdos, Füredi, Mosonyi, Tomori by telephone (+36 1 327 7560) or by fax (+36 1 327 7561) or by email (elek.zsuzsa@gfmt.hu).
Endnotes
(1) According to the Hungarian Financial Supervisory Authority's annual report.
(2) However, the bill introduced contains strict data protection provisions.
Comment or question for author
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.
Register at www.iloinfo.com.
vissza az oldal tetejére