Borrowers in the United Arab Emirates face credit rating checks following a new government ruling.
The Al Etihad Credit Bureau has taken five years to get out of the starting blocks after first being proposed in the wake of the 2008 global financial crisis.
But the bureau has started running checks on potential borrowers after a cabinet resolution issued by Shaikh Mohammed bin Rashid Al Maktoum on May 18, 2014.
The establishment of the bureau has been warmly welcomed by banks, credit card providers and other lenders as a means of curbing bad debts in the UAE.
A spokesman for the UAE Banks Federation said the credit bureau will give them invaluable information to undertake due diligence before agreeing loans.
Credit history
The data held by the bureau will cover defaults on loans or credit payments and any court judgments against the customer going back five years from the date of application.
The bureau will not report on mortgages or investments held by prospective borrowers.
Until now, lenders have had no formal process of assessing a potential customer’s credit history, which has left the way open to customers taking advantage of banks and credit companies.
The bureau will also help lenders improve service to borrowers by speeding up their decision making.
The bureau will offer information to the government, banks, commercial and professional organisations, cooperatives and foreign companies registered in the UAE.
Al Etihad Credit Bureau started collating data in April 2014. Banks and financial institutions were requested to hand over customer credit information for the past two years together with their Emirates ID.
A fail-safe is built into the system that allows a loan applicant to query errors in their credit report.
Start delayed
Meanwhile, some banks have been accused of failing to hand over customer information, leading to delays in the start of the bureau’s operation.
According to the bureau, only the National Bank of Fujairah has given full information on all customers for the past two years.
“Many banks have offered customer credit information to the bureau,” said a spokesman. “Unfortunately, much is below the expected standards and will not let us make a comprehensive report of a customer’s credit standing in the terms we had agreed with the banks.”
The bank trade body declined to comment on the accusation.
The bureau was expecting comprehensive credit information from 25 lenders who share around 96% of all mortgages, loans and credit in the UAE.
