Legislative Framework for Credit Histories Bureaus' Operations

Legislative Framework for Credit Histories Bureaus’ Operations

List of Legislation Applicable to Credit Bureaus Operations

• Law of Ukraine “On Organizing Formation and Circulation of Credit Histories” of June 23, 2005 # 2704-IV 

• Law of Ukraine “On Licensing Certain Types of Business Activity” of June 1, 2000 # 1775-III 

Cabinet of Ministers’ Resolution “Scope of Responsibilities of the Body Authorized to Perform Government Regulation of Credit History Bureaus’ Operations” of December 7, 2005 # 1174

• Law of Ukraine “On Banks and Banking” of December 7, 2000 # 2121-III 

• Law of Ukraine “On Information” of October 2, 1992 # 2657-XII

• Law of Ukraine “On Credit Unions” of December 20, 2001 # 2908-III

Law of Ukraine “On Organizing Formation and Circulation of Credit Histories”

• Law of Ukraine “On Organizing Formation and Circulation of Credit Histories” was adopted on June 23, 2005 and came into force on January 29, 2006.

• The Law enacts majority of clauses enforced by the US Fair Credit Reporting Act in 1996.

Comparative Analysis Compliance of the Law with European Standards

Comparative AnalysisCompliance of the Law with European Standards

Article 8 of the Law “On Organizing Formation and Circulation of Credit Histories”

Information prohibited for collection

“Bureaus are not entitled to collect and store in credit histories the information about individuals related to:

Nationality, race and ethnic origin;

Political views;

Religion and philosophical conviction;

State of health;

Membership in parties or other civil society organizations” .

Article 8 of the Directive 95/46/ЕС European Parliament and Council as of 24.10.1995г.

“On Protection of Individuals’ privacy while processing personal data and on free movement of such individuals“.

Comparative AnalysisCompliance of the Law with European Standards

Article 9 of the Law “On Organizing Formation and Circulation of Credit Histories”

“User shall be entitled to submit information to the Bureau to include into credit history only subject to a written consent of a legal entity or individual which has closed a loan agreement with the User.”

Article 7 of the Directive 95/46/ЕС European Parliament and Council as of 24.10.1995г.

“On Protection of Individuals’ privacy while processing personal data and on free movement of such individuals“.

Purpose of the Law

The Law is aimed to:

• Regulate social relations arising in connection to collection, processing, and securing usage of information at the time of performing by entities/individuals of monetary obligations

• Ensure operation of institutions related to exchange of information about monetary obligations

• Secure rights and interests of subjects of credit history

Terminology

• Credit history is a set of data about a legal entity or individual, including its identity, its past performance on liabilities under loan agreements, and other publicly available information in accordance with law.

• Credit Histories Bureau is a legal entity engaged solely in collection,

storage and usage of information made part of credit history;

• User of Bureau is a legal entity or individual, a subject of entrepreneurial activity, which closes credit deals and, under Agreement with the Bureau, submits and is entitled to receive information made part of credit history;

• Subject of credit history is any legal entity or individual which has signed a credit deal and with regard to which a credit history is maintained;

Principle Clauses of the Law

Sources of Credit Histories Formation

Data from public registries, information from other general use data bases, and sources open for everyone’s usage except for data (information) classified as state secret.

Data submitted by Users to Bureau upon written consent of the credit history subject

Information which may not be collected

Bureaus are not entitled to collect and store in credit histories the information about individuals related to their:

Nationality, race and ethnic origin;

Political views;

Religion and philosophical conviction;

State of health; Membership in parties or other civil society organizations.

Operationalization of Credit Histories Bureau

Individual Legal entity

Statutory CapitalAt least 5 mln UAH

Register the Bureau as joint-stock company

Present to the Licensing Authority document confirming paid-in statutory capital

and By-laws of the Bureau

Obtain license Begin operations

Association of Bureaus

BUREAU BUREAU BUREAU

BUREAUs Association

Government Body Authorized to Regulate Operations of Credit Histories Bureaus

Role of the Ministry of Justice in Regulation of the Credit Histories Bureaus’ Operations

• Cabinet of Ministers’ Resolution “Scope of Responsibilities of the Body Authorized to Perform Government Regulation of Credit History Bureaus’ Operations” of December 7, 2005 # 1174 designated the Ministry of Justice of Ukraine to regulate operations of the credit histories bureaus.

According to the Law of Ukraine “On Organizing the Formation and Circulation of Credit Histories” of 23.06.2005 # 2704-IV The Ministry of Justice of Ukraine :

Authorities of the Ministry of Justice :

Issues regulatory acts and recommendations related to operations of the Credit Histories Bureaus;

Issues licenses;

Maintains the Common Registry of credit histories bureaus and notifies the bureaus in writing on all changes therein;

Supervises compliance of the bureaus with the Law, regulations of theMinistry of Justice and bureaus’ by-laws;

Authorities of the Ministry of Justice:

Oversees target usage of information contained in credit histories at the time Of reorganization or liquidation of bureaus;

Notifies bureau in writing on any detected violation and demands that appropriate remedies should be taken to rectify such violation;

Brings action to court demanding to impose financial sanctions;

Performs other functions provided for in the Ukrainian legislation;

Ministry of Justice of Ukraine

Department of credit histories bureaus legalization and regulation

Regulation of credit histories bureaus’ operations

An Inter-agency work groupTo facilitate enforcement of the

Law of Ukraine «On Organizing the Formation and

Circulation of Credit Histories” Was set up under the

Ministry of Justice’s Order# 805\7 of June 7, 2006.

Draft regulatory acts

Prepare suggestionsTo bring Ukrainian legislation

In compliance with the Law of Ukraine

“On Organizing the Formation and Circulation of Credit Histories”

Members of the Inter-Agency Working Group

• Elena Semerkina, Head of CB Licensing and Regulation Department, Ministry of Justice of Ukraine, Working group Leader

• Vera Yarmolenko - Team leader, Regulatory and methodological Support, CB Licensing and Regulation Department, Ministry of Justice of Ukraine, working group deputy leader;

• Ruslan Lomaka - Leading specialist, CB Licensing and Regulation Department, Ministry of Justice of Ukraine, Working group member;

• Yuriy Komakha - Team Leader, Legal Regulation of Finance Services, Finance-related Legislation Department, Ministry of Justice of Ukraine, member of the working group;

• Javier Piedra, Senior Advisor, Access to Credit Initiative USAID/Ukraine (member of the Working group by consent)

• Oleg Kalchenko, Advisor, Access to Credit Initiative USAID/Ukraine (member of the Working group by consent);

• Sergiy Kysil, Advisor, Access to Credit Initiative USAID/Ukraine (member of the Working group by consent);

• Natalia Schuryk, Advisor, Access to Credit Initiative USAID/Ukraine (member of the Working group by consent);

• Antonina Palamarchuk, Vice-President, Ukrainian Banks Association, General Director “First National Bureau of Credit Histories“ (member of the working group by consent);

Members of the Inter-Agency Working Group

• Aleksandr Karpov, Director, Ukrainian Interbank Payment Systems Member Association, Parliament Committee consultant ( member of the working group by consent);

• Petr Reshetnikov, Project Manager, Credit Histories Bureau Project (member of the working group by consent);

• Vasily Glazunov, Head of IT Department, “First National Bureau of Credit Histories” (member of the working group by consent);

• Elena Zabarylo, Legal advisor, “First National Bureau of Credit Histories”;• Yevhen Nevmerzhitsky, General Manager, CreditInfo Ukraine Ltd.;• Elena Volynskaya, Director, Legal Department, CJSC “International Bureau of Credit Histories”;• Mykhail Khodakovsky, General Director, “First Credit Histories Bureau Ltd.”

Drafting Regulatory Acts

Order “On Approval of Licensing Terms for Conducting Business Activity on Collection, Processing, Storage, Securing, and Usage of Information Made Part of Credit History”.

Ministry of Justice,State Regulatory Policy and Entrepreneurship Committee

Coordination phase

Order “Supervision Procedure Over Compliance with Licensing Terms of Conducting Business Activity on Collection, Processing, Storage, Securing and Usage of Information Made Part of Credit History.

Ministry of Justice,State Regulatory Policy and Entrepreneurship Committee

Development phase

Drafting Regulatory Acts

Cabinet of Ministers’ Resolution “On the Procedure of Data Transfer from Public Registries”

Ministry of Justice Drafting planned

Cabinet of Ministers’ Resolution “On Payment Procedure for Transfer of Data from Public Registries”

Ministry of Justice and Ministry of Finance of Ukraine

Drafting planned

Drafting Regulatory Acts

Instruction “On the procedure of formation and maintenance of the Common state registry of Credit Histories Bureaus”

Ministry of Justice Drafting planned

Changes and amendments to the Law of Ukraine “On Organizing Formation and Circulation of Credit Histories” and/or other regulatory acts of Ukraine

Ministry of Justice Drafting planned