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The Sharing of Mortgage Data for Credit Assessment

 


Date: 5 January 2011
The Sharing of Mortgage Data for Credit Assessment

1.    The Privacy Commissioner for Personal Data (the Commissioner) Mr. Allan Chiang issues a consultation document today (5 January) to mark the commencement of a public consultation exercise to seek the views of stakeholders and the general public on the privacy implications of the proposed extension of the existing credit data sharing system to include both positive and negative mortgage data in respect of residential as well as non-residential properties.  The present system enables the credit providers to share through a credit reference agency (“CRA”) both positive and negative credit data for unsecured loans, but only negative credit data for residential mortgage loans.

2.    The proposal to share additional mortgage data of consumers among credit providers has been made by the financial services industry (“the industry”) and supported by the Hong Kong Monetary Authority (“HKMA”) as a measure that would help credit providers in enhancing the completeness and accuracy of their credit risk assessment, thus creating a more efficient credit market and reducing the risk of asset bubble in the property market as a result of indiscriminate borrowing by some consumers and inability of credit providers to identify borrowers with more indebtedness than they can repay.   The industry has emphasized that prudent lending and responsible borrowing would help safeguard the overall financial stability of Hong Kong, particularly in view of the increasing pressure on the property market due to the unfavourable global financial environment of low interest rates and excessive liquidity.

3.    In essence, the industry’s proposal features :

(a)    disclosure to the CRA of (i) positive mortgage data (with limited items) in respect of residential and non-residential properties and (ii) negative mortgage data in respect of both residential and non-residential properties (as opposed to sharing of only negative mortgage data for residential properties as at present);

(b)    disclosure to the CRA of such data (referred to in (a) above) in respect of borrowers, guarantors and mortgagors (data disclosed at present relate to borrowers and guarantors only);

(c)    disclosure to the CRA with respect to pre-existing mortgages (at the time of implementation of the proposal) positive data for residential properties, and both positive and negative data for non-residential properties, with or without prior explicit notification to these customers, in preparation for access and use subject to (d) and (e) below;

(d)    (subject to the customers’ written consent) use of the data immediately after the implementation date for credit assessment of applications for both mortgage loans and other credit facilities; and

(e)    (subject to the customers’ written consent) use of the data not earlier than 24 months after the implementation date for review of the customers’ general credit portfolio.

4.    “While recognizing and appreciating the broader public interest that the industry’s proposal will serve, I also wish to point out that the industry proposal has serious implications on data protection and privacy. It has been widely acknowledged that consumer's credit information, such as the overall credit exposure and the number of outstanding mortgages, are data that are very personal and private to the individuals concerned.  We need to strike a fair and reasonable balance between the public interest and the privacy interests of the individual so that the former is not fostered unduly at the expense of the latter.” Mr. Chiang said. 

5.    In brief, there are six privacy issues as outlined below:-

Issue 1:    Whether it is necessary and not excessive for the CRA to hold the additional mortgage data contributed by the credit providers, namely, positive mortgage data in respect of residential properties, and both positive and negative mortgage data in respect of non-residential properties (CRA already holds negative mortgage data in respect of residential properties);

Issue 2:    Whether it is appropriate to restrict the amount of positive mortgage data contributed by the credit providers to the CRA in line with the latter’s operational needs, and to restrict the access of such data by credit providers (upon the credit applicants’ written consent) to the Mortgage Count (that is, number of outstanding mortgages) only;

Issue 3:    Whether it is appropriate for the additional mortgage data in respect of pre-existing mortgages at the time of the implementation of the proposal to be contributed to the CRA, with or without prior explicit notification to the consumers;

Issue 4:    Whether it is appropriate to permit, subject to the consumers’ written consent, access to the additional mortgage data by the credit providers to evaluate not only mortgage loan applications but also to assess other new consumer credit applications as well as review and renewal of the consumers’ existing credit facilities;

Issue 5:    Whether 24 months is an appropriate transitional period before access to the additional mortgage data is allowed for the purpose of general portfolio reviews of consumers’ credit worthiness; and

Issue 6:    What and how additional privacy safeguards should be imposed upon the CRA and the credit providers commensurate with an enlarged credit database and greater sharing and use of the mortgage data.

6.    “I am inclined to confirm in the positive for the second privacy issue.  As regards the other five privacy issues, my position is reserved at this stage.  Stakeholder and public views on the issues are invited and these will be duly taken into account before I finally make a determination.  Depending on the outcome of the public consultation and other factors, the Code of Practice on Consumer Credit Data will be amended appropriately to allow for changes, if any, in the system of consumer credit data sharing.” Mr. Chiang added.

7.    The public consultation will last until 8 February 2011.  The Office of the Privacy Commissioner for Personal Data (“PCPD”) welcomes submission of views and comments before this deadline.  PCPD has also commissioned Policy 21 Ltd., an independent consultancy firm, to reach out to the general public and approach stakeholders to solicit views.

8.    Further, a public forum will be organized for interested parties to share views with the industry and HKMA.  It will be held from 6 pm to 8 pm on 18 January 2011 at the Council Chamber, 8/F Meng Wah Complex, University of Hong Kong, Pokulam Road, Hong Kong.  Members of the public who would like to participate in the forum are encouraged to register as early as possible at (http://www.policy21.org/recruitment.html).

9.    Details of the industry proposal and the privacy issues are contained in the consultation document, copies of which are available from the PCPD at 12/F., 248 Queen’s Road East, Wan Chai, Hong Kong, and at Public Enquiry Centres of District Offices from 6 January 2011 (afternoon) onwards.  The consultation paper is also available immediately on the PCPD website (http://www.pcpd.org.hk/english/publications/con_doc2010.html).




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