Establishes Credit Information System Act

Policy intent of the Credit Information System

The State recognizes the need to establish a comprehensive and centralized credit information system for collecting and disseminating fair and accurate information relevant to, or arising from, credit and credit-related activities of all entities participating in the financial system.
The system is designed to ensure reliable credit information on the credit standing and track record of borrowers.
The State expects the system’s operations and services to: improve overall availability of credit (especially for micro, small and medium-scale enterprises); make credit more cost-effective; and reduce excessive dependence on collateral.
The State shall endeavor to provide credit information at the least cost to all participants and shall ensure protection of consumer rights and fair competition.
The system is intended to enable financial institutions to reduce overall credit risk, contributing to a healthier and more stable financial system.

Core definitions and key terms

An “Accessing entity” means any submitting entity or any other entity authorized by the Corporation to access basic credit data from the Corporation.
“Basic Credit Data” means positive and negative credit information provided by a borrower to a submitting entity for application for and availment of a credit facility, plus creditworthiness information and other factual and objective information in the submitting entity’s files or other information sources.
Basic Credit Data excludes confidential information on bank deposits and/or clients funds under Republic Act No. 1405, Republic Act No. 6426, Republic Act No. 8791, and their amendatory laws unless there is a borrower written waiver duly accomplished.
A “Borrower” means a natural or juridical person, including any Local Government Unit (LGU), its subsidiaries and affiliates, that applies for and/or avails of a Credit Facility.
A “Credit Facility” means any loan, credit line, guarantee, or any other form of financial accommodation from a submitting entity; bank deposits are not considered a credit facility extended by the depositor in favor of the bank.
“Negative Credit Information” covers poor credit performance, including defaults on loans, adverse court judgments relating to debts, and reports on bankruptcy, insolvency, petitions or orders on suspension of payments and corporate rehabilitation.
“Positive Credit Information” covers good credit performance, including timely repayments or non-delinquency.
“Corporation” refers to the Credit Information Corporation established under Section 5.
“Credit Report” is a summary of consolidated and evaluated information on creditworthiness, credit standing, credit capacity, character, and general reputation of a borrower.
“Credit Rating” is an opinion on the creditworthiness of a borrower or of an issuer of debt security using an established and defined ranking system.
“Submitting entity” includes entities providing credit facilities, such as banks, quasi-banks, trust entities, investment houses, financing companies, cooperatives, nongovernmental micro-financing organizations, credit card companies, insurance companies, and government lending institutions.
“Special Accessing Entity” means a duly accredited private corporation engaged primarily in providing credit reports, ratings, and other similar credit information products and services.
“Outsource Entity” is an accredited third-party provider to whom the Corporation may outsource processing and consolidation of basic credit data, under qualifications, criteria, and strict confidentiality guidelines the Corporation must prescribe and duly publish.
“Non-Accessing Entity” is any authorized entity other than a submitting entity, special accessing entity, or borrower that is authorized by the Corporation to access credit information from a special accessing entity.
“BSP” refers to the Bangko Sentral ng Pilipinas, created under Republic Act No. 7653.
“SEC” refers to the Securities and Exchange Commission.
“Relevant Government Agencies” refers to the Department of Finance, Department of Trade and Industry, Bangko Sentral ng Pilipinas, Insurance Commission, and the Cooperative Development Authority.
“Government Lending Institutions” refers to existing and future government financial institutions (GFIs) and government-owned and controlled corporations (GOCCs) primarily engaged in lending activities.

Establishment and operation of credit information system

A credit information system is established to implement the policy under Section 2.
Banks, quasi-banks, their subsidiaries and affiliates, life insurance companies, credit card companies, and other credit-facilitating entities are required to submit basic credit data and updates regularly to the Corporation.
The Corporation may include other credit providers as compulsory participants, subject to standards and rules prescribed by the SEC in coordination with relevant government agencies.
All participating submitting entities must regularly submit negative and positive credit information that updates and/or corrects borrowers’ credit status.
The Corporation must set a submission time interval that is not less than fifteen (15) working days and not more than thirty (30) working days.
The Corporation must regularly collect basic credit data of borrowers at least on a quarterly basis to correct/update basic credit data.
The Corporation may access credit and other relevant information from government offices, judicial and administrative tribunals, prosecutorial agencies and other related offices, and pension plans administered by government.
Each submitting entity must notify borrowers of the obligation to submit basic credit data to the Corporation and the disclosure to the Corporation, subject to the Act and implementing rules.

Borrower rights, confidentiality limits, and dispute handling

The Corporation is authorized to release consolidated basic credit data on the borrower, subject to Section 6.
Negative credit information in borrowers’ credit history files remains in the Corporation’s database unless sooner corrected, for not more than three (3) years from and after the date negative information was rectified through payment or liquidation, or through settlement of debts via compromise agreements or court decisions exculpating the borrower.
Negative information must be corrected and updated within fifteen (15) days from payment, liquidation, or settlement of the debts.
Special Accessing Entities are accredited by the Corporation under standards and rules the SEC prescribes in coordination with relevant government agencies.
Special Accessing Entities may access the Corporation’s consolidated basic credit data, subject to Sections 6 and 7 and implementing rules.
Special Accessing Entities are prohibited from releasing basic credit data from the Corporation’s credit reports and credit ratings derived from that data to non-accessing entities unless the borrower gives written consent or authorization.
If the borrower is an LGU or its subsidiary or affiliate, a Special Accessing Entity may release credit information on the LGU, its subsidiary, or affiliate upon written request and payment of reasonable fees by a constituent of the concerned LGU.
Outsource Entities are absolutely prohibited from releasing basic credit data received from the Corporation other than to the Corporation itself.
Accessing Entities must hold strictly confidential any credit information received from the Corporation.
A borrower has the right to know the causes of refusal of a credit application or credit facility/services from a financial institution that uses basic credit data as the basis for refusal.
A borrower is entitled, for a reasonable fee, to ready and immediate access to credit information pertinent to the borrower.
If credit information is erroneous, incomplete, or misleading, the borrower may dispute the incorrect, incomplete, outdated, or misleading credit information before the Corporation.
The Corporation must investigate and verify disputed information within five (5) working days from receipt of the complaint.
If accuracy cannot be verified and cannot be proven, the disputed information must be deleted.
The borrower and the accessing entities and special accessing entities that received the information must be informed of correction or removal within five (5) working days.
The Corporation must use a simplified dispute resolution process to fast-track settlement/resolution of disputed credit information.
Denial of these borrower rights without justifiable reason entitles the borrower to indemnity.

Credit Information Corporation organization and authority

A Credit Information Corporation is created with the primary purpose to receive and consolidate basic credit data, act as a central registry/repository of credit information, and provide access to reliable standardized information on credit history and financial condition of borrowers.
The Corporation is authorized to adopt and use a corporate seal; enter into contracts; incur liabilities; lease or own and sell or dispose of property; sue and be sued; and compromise, condone, or release liability and perform all acts necessary to carry out the Act’s purposes.
The Corporation’s authorized capital stock is PHP 500,000,000.00, divided into common and preferred shares that are non-voting.
The National Government shall own and hold 60% of the common shares, while the remaining 40% is owned by and held by qualified investors limited to industry associations of banks, quasi-banks, other credit-related associations, including associations of consumers.
PHP 75,000,000.00 is appropriated in the General Appropriations Act for the National Government subscription representing its 60% equity share, and PHP 50,000,000.00 is subscribed and paid up by qualified investors under Section 5(d).
The National Government may subscribe or purchase securities or financial instruments issued by the Corporation as a supplement to capital.
Equal equity participation in the Corporation is offered and held by qualified private sector investors, but no single qualified investor represented by an association of banks, quasi-banks, and other credit-related associations (including associations of consumers) may exceed 10% of the total common shares issued.
The SEC, in coordination with relevant government agencies, prescribes additional requirements for the Corporation’s establishment, including industry representation, capital structure, number of independent directors, director nomination process, and other requirements to ensure consumer protection and fair competition.
The Chairman of the SEC serves as Chairman of the Corporation’s board; when the SEC Chairman cannot attend, he/she designates an Associate Commissioner of the SEC as alternate.
The Corporation’s powers and functions are exercised by a board of directors composed of fifteen (15) members, with directors representing government shares appointed by the President.
Directors and principal officers must be qualified under the “fit and proper” rule for bank directors and officers.
The SEC, in coordination with relevant government agencies, prescribes, passes upon, and reviews qualifications and disqualifications; after due notice, the SEC may disqualify, suspend, or remove a director who commits or omits an act rendering the person unfit.
In determining fitness, due regard is given to integrity, experience, education, training, and competence.
Board members must be Filipino citizens and at least 30 years of age; they must be persons of good moral character, unquestionable integrity, known probity, and competent in law, finance, economics, computer science, or information technology.
No person may be nominated by the National Government if within three (3) years prior to appointment the person was connected directly with a banking or financial institution as director/officer or had substantial interest therein.
The board appoints officers and employees not otherwise provided in the Act, defines duties, fixes compensation, and imposes discipline for cause.
Officers’ and employees’ salaries and compensation are exempt from the Salary Standardization Law.
Appointments in the Corporation (except policy-determining, primarily confidential, or highly technical positions) are made under the Civil Service Law.
The Corporation must acquire state-of-the-art technology and facilities to ensure up-to-date credit information, enable electronic and written relay to authorized accessors, and ensure accuracy of collected, stored, and disseminated information.
The Corporation must implement a borrower’s identification system to consolidate credit information.
The importation by the Corporation of all equipment, hardware, or software and other equipment needed for operations is fully exempt from customs duties and from all other taxes, assessments, and charges related to such importation.
The Corporation’s principal place of business is in Metro Manila, but it may maintain branches elsewhere as required by business operations.
Any acquisition of goods and services by the Corporation must be subject to Procurement Laws.

Equity, governance transition, and operational structure

The National Government continues to hold 60% of the common shares for a period not exceeding five (5) years from the Corporation’s commencement of operations.
After that period, the National Government must dispose of at least 20% of its stockholdings to qualified investors limited to industry associations of banks, quasi-banks, other credit-related associations, including associations of consumers.
When majority common voting shares pass to private investors, stockholders must cause adoption and SEC registration of amended articles of incorporation within three (3) months from transfer of ownership.
Equal equity participation must be offered and held by qualified investors, consistent with the equity rules in Section 5.

Confidentiality obligations and limits on disclosure

The Corporation, submitting entities, accessing entities, outsource entities, special accessing entities, and duly authorized non-accessing entities must hold credit information under strict confidentiality and may use it only for the declared purpose of establishing the borrower’s creditworthiness.
Outsource Entities are absolutely prohibited from releasing basic credit data received from the Corporation except to the Corporation itself.
Accreditation of an accessing entity, special accessing entity, and/or outsource entity that violates confidentiality or misuses credit information may be suspended or revoked.
Any entity violating Section 6 may be barred from accessing the credit information system and penalized pursuant to Section 11.
The Corporation may release and disclose consolidated basic credit data only to Accessing Entities, Special Accessing Entities, Outsource Entities, and Borrowers.
Basic credit data released to Accessing Entities is limited to data pertaining to existing borrowers or borrowers with pending credit applications.
Credit information cannot be released to entities other than those enumerated in Section 6 except upon order of the court.

SEC rules, educational campaign, oversight, and implementation

A continuing nationwide educational campaign must be developed and undertaken by the Corporation to promote benefits of a credit information system; create awareness of borrowers’ rights to access credit reports; disseminate rights to dispute incorrect/inaccurate information; familiarize consumers with credit information collection/storage/dissemination procedures; and brief consumers on other related information.
The SEC, in coordination with relevant government agencies and industry stakeholders, must issue implementing rules and regulations that ensure a healthy balance between reliable credit information and consumer protection and embody, among others: limiting basic credit data to objective and factual information excluding subjective information or opinion; restrictions on use and transfer of credit information; borrowers’ rights to access and dispute factual accuracy; requirements and standards for establishing the Corporation; accreditation standards for submitting and special accessing entities and non-accessing entities; sanctions for non-submission/delayed/erroneous reporting by submitting entities; sanctions for breaches of confidentiality or misuse by accessing, special accessing, outsource entities, and duly authorized non-accessing entities; and violations of other applicable rules.
Administrative sanctions may be imposed as fines determined by the Corporation but must not exceed PHP 30,000.00 a day for each violation, considering attendant circumstances such as nature and gravity; administrative sanctions apply without prejudice to criminal and other sanctions under the Act and relevant laws.
The SEC may impose suspension or cancellation of rights of any Accessing Entity or Special Accessing Entity to access credit information from the Corporation.
The SEC may issue subsequent regulations consistent with IRR approved by the Congressional Oversight Committee.
The SEC may regulate access to the credit information system and the fees collected by the Corporation from Accessing and Special Accessing Entities, considering lowering the cost of credit, promoting fair competition, and enabling the Corporation to employ state-of-the-art technology.
Basic credit data about a borrower is limited to credit information existing on the date of enactment of the Act and thereafter.

Oversight committee structure and effect

A Congressional Oversight Committee is created, composed of seven (7) members from the Senate and seven (7) members from the House of Representatives.
Senate members are appointed by the Senate President with at least three (3) Senators representing the minority.
House members are appointed by the Speaker with at least three (3) members representing the minority.
After the Oversight Committee approves the implementing rules and regulations, it becomes functus officio and ceases to exist.
Congress may revive the Congressional Oversight Committee in case of a need for major revision(s) in the implementing rules and regulations.

Indemnity in favor of the Corporation and officers

Submitting entities, Accessing Entities, Special Accessing Entities, Outsource Entities, and duly authorized non-accessing entities must hold the Corporation, its directors, officers, and employees free and harmless to the fullest extent permitted by law and must indemnify them for liabilities, losses, claims, demands, damages, deficiencies, costs, and expenses arising in connection with performance of functions, unless the Corporation or any officer/employee is found liable for willful violation of the Act, bad faith, malice, and/or gross negligence.
Indemnity provisions do not prejudice criminal liability under existing laws.

Criminal penalties for willful violations

Any person who willfully violates any provision of the Act or any rules and regulations promulgated by the SEC in coordination with relevant government agencies is subject to, upon conviction, either: a fine of not less than PHP 50,000 nor more than PHP 1,000,000, imprisonment of not less than 1 year nor more than 5 years, or both, at the discretion of the court.

Secrecy of bank deposits protected

Nothing in the Act impairs the secrecy of bank deposits and/or client funds and investments in government securities or funds, consistent with Republic Act No. 1405, Republic Act No. 6426, Republic Act No. 8791, Republic Act No. 9160, and their amendatory laws.

SEC reports and lead agency enforcement

The SEC must submit an annual report to Congress on the status of implementation of the Act.
The SEC is the lead government agency to implement and enforce the Act and must consult and coordinate with other relevant government agencies in adopting rules and regulations for full and effective implementation, taking into account the policy objectives in Section 2.

Separability and repealing provisions

If any provision of the Act or its application is held invalid, the remaining provisions or sections remain effective.
Presidential Decree No. 1941 is repealed in its entirety.
All inconsistent laws, decrees, executive orders, rules and regulations, or parts thereof are repealed, amended, or modified accordingly.