Credit Bureaux are basically corporate entities that specialize in providing lenders & creditors with due diligence-based information on potential borrowers needed to make lending decisions.
In Nigeria, credit bureaus are licensed businesses operating under a defined regulatory framework.
The focus of this article is the process of getting a a credit bureau registered, with a focus on :-
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– The components of the regulatory framework governing credit bureaux in Nigeria.
– Who is eligible to promote and own a credit bureau registered in Nigeria.
– The licensing requirements for a credit bureau in Nigeria.
– The permissible purposes of a credit bureau in Nigeria.
What is the main Regulatory instrument governing credit bureaux in Nigeria?
The main regulation governing credit bureaux in Nigeria is the CBN Credit Bureaux (Licensing, Operations & Regulations) Guidelines 2008.
What is the applicability scope of the CBN Guidelines?
The CBN Guidelines are applicable to all credit bureaux licensed by the CBN in Nigeria.
What is the objective of the CBN Guidelines?
The CBN Guidelines were drafted and passed to define the licensing, operational & regulatory requirements for a privately owned credit bureau under the CBN Act.
Who can legally own and invest in a credit bureau?
– Individuals and corporate entities can invest in a credit bureau subject to CBN approval.
– A bank is not allowed to invest in more than 1(One) credit bureau.
– Investments by a bank and its subsidiaries in a credit bureau shall not exceed 10% of the total paid-up capital of the credit bureau.
What are the licensing requirements for credit bureaux in Nigeria?
Licensing credit bureaux in Nigeria is in 3 stages namely :-
– The Application receipt and appraisal stage.
– The Approval-in-Principle stage.
– The Final Licensing stage.
Application Receipt and Appraisal
This stage involves sending an application to the CBN along with:-
- A non-refundable application fee of 250,000.00 Naira made payable to the CBN.
- Evidence of Payment of the minimum capital requirement of 500 Million Naira (refundable) to the CBN.
- A Certified True Copy CTC of the applicant company’s MEMART Memorandum/Articles of Association.
- A detailed feasibility report on the proposed credit bureau.
The Approval-in-Principle (AIP) stage
Upon being satisfied with an application, the CBN will grant an AIP lasting 180 days within which the credit bureau must comply with all the conditions specified in the guidelines, otherwise the AIP might be withdrawn by the CBN.
The Final Operating Licensing stage
After the AIP grant has expired and all necessary pre-conditions have been satisfied by the applicant, a final operating license will be granted subject to the following:-
– The CBN has conducted an on-site verification to ascertain it’s readiness to commence operations.
– A license will automatically expire if a credit bureau has not commenced business within the first 6 months of the issuance of the license.
– All licensed credit bureaus shall be required to add “credit bureau” to their corporate names e.g. ABC LTD(credit bureau).
– Such names as mentioned in the preceding paragraph shall be registered with the Corporate Affairs Commission (CAC).
– No credit bureau shall be registered with a name which includes words like ‘central’, ‘federal’, ‘federation’, ‘national’, ‘Nigeria’, ‘state’, ‘Christian’, ‘Islamic’ or ‘Biblical’.
What are the permissible purposes for accessing credit information from a credit bureau under the CBN Guidelines?
Some of the permissible purposes for accessing any credit information from a credit bureau are:-
- Applications for credit by borrowers.
- The review of existing credit facilities.
- Funds transfers of 1 Million Naira and above.
- Prospective/Current employee checks.
- The acceptance of guarantees.
Where is a credit bureau allowed to collect customer/borrower data from?
Credit Bureaux shall under the Guidelines be allowed to collect data from:-
- Nigerian banks.
- The CBN Credit Risk Management System
- Insurance companies.
- Asset management companies.
- Other licensed credit bureaux.
Are there sanctions for illegal data disclosures by credit bureaux?
Yes, there are. Illegal disclosures by credit bureaux can attract punitive fines of 500 Thousand Naira and subsequent daily fines of 10,000.00 Naira from the CBN.