Down with black list!
04 November, 2010
Down with black list!

Black Lists of insolvent banking clients are revoked based on the memorandum of understanding signed by National Bank of Georgia, Credit-info and commercial banks on October 26, 2010. The unified database of credit related information will be created based on the memorandum that enters into effect starting its endorsement date.


The development of the unified database of credit related information is supposed to foster an increase in the credit activities, credit accessibility and the transparency of the financial sector in

Georgia.
“I am glad that after several months’ work the National Bank of Georgian (NBG), Credinfo and banking sector came to a common decision. The approach to the client related information is completely changed: there will be no more separate, so called “black lists” and a single credit history will be formed about a borrower reflecting the met and forgone liabilities. Protection of the consumers’ rights is our present priority. To have it achieved the NBG will embark on a number of profound initiatives. The memorandum signed today is a first step in this direction,” Giorgi   Kadagidze, President of the NBG, stated on October 28, 2010.


Based on the memorandum commercial banks agree that the information in a credit history of “Credinfo” about a subject will not be the reason for the refusal of a credit. The credit history of a borrower will be kept for 7 year. As for the duration for keeping information about forgone liabilities, it was decreased from 7 to 5 years.  A subject will have a right to receive information kept in the database about him from a “Credinfo” Georgian Office after submitting the identification card.
Creditinfo JSC was created by banks on purpose to accumulate the credit history of their clients so as to improve the risk management of banks. However, credit history of borrowers was separated in two categories including positive [obedient-borrowers who pay in time] and negative [non-obedient payers with past-due loans] groups. The negative group was largely known as “the black list”. The number of borrowers registered in Creditinfo database exceeded 2 million by October of this year that makes almost half of Georgian population and 80% of this is made by positive loans, Sandro Gomiashvili, Head of Creditinfo, told Georgian Journal. 
However the separated database laid grounds to confusion and misunderstanding at banks and they frequently refused to disburse consumer loans to persons registered even once in the black list because the negative information did not include detailed description how the loan payment terms were violated. Meantime all loans above GEL 10 disbursed by Georgian banks are registered at Creditinfo and if a person violates the payment deadline by 30 days he/she is already put on the negative list irrespective the loan amount. In a word no matter if one failed to pay GEL 50 or GEL 50 thousand in time he/she was blacklisted. Moreover, if a borrower failed only once to pay in time the 10-year loan for example and covered the questioned installment by a month delay this borrower was also blacklisted.


“This kind of separated data base rather misled than helped banks to be aware of their potential client’s credit history, because the negative information was too scanty and banks had to inquire the real credit history of questioned clients at partner banks where the client had a loan before. Some people have loans at several banks and it took a lot of time to gather information and they preferred refuse frequently,” Zurab Gvasalia, President of Association of Georgian Banks, explained to Georgian Journal.


Now the unification of database obliges banks to provide with more detailed credit history of their borrowers that will be providing with both positive and negative information and detailed description of past-due loans including how much was the loan, how long and how accurately paid. This will save time and create better access to loans.
According to Gomiahsvili the separated database affected rather consumer credits than mortgage.
“Banks research mortgage very accurately as a rule as they are bigger and more long-term and accumulate all possible information on it. But consumer credit unlike mortgage are short-term and small, and banking officers who have to make decision on disbursement of consumer loans in 5-10 minutes preferred to avoid risk and refuse clients who have ever been registered at the black list, the unified database will improve the situation to this end,” Gomiahsvili elaborated.

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