UAE residents can get credit report online by year end

The credit bureau opened for business in November, but concerns surrounding who would be responsible for incorrect data made some banks hesitate to use it initially.

Marwan Lutfi, the credit bureau’s chief executive, said they are working with banks to promote the credit bureau and responsible lending. Lee Hoagland / The National

The head of the country's nascent credit bureau said residents would be able to get a copy of their credit report online by the end of the year.

“We are hoping that the online service will be launched in the fourth quarter this year, in which customers will actually be able to submit their documents and IDs online and request a report, and that report will be delivered,” said Marwan Lutfi, the chief executive of Al Etihad Credit Bureau.

The digital service should mean that people should only have to visit their offices when they need to have a “a long discussion or they want to inquire about a dispute”, he said.

The credit bureau opened in November, but concerns surrounding who would be responsible for incorrect data made some banks hesitate to use it initially. While that issue has been resolved, banks are not obliged to use the bureau when making lending decisions. Nor do those seeking loans need a copy of their credit history. Usually, people who access reports have been rejected for a loan.

The cost of living is increasing, with prices nationwide rising annually by 4.4 per cent in the 12 months to July, up from 4.2 per cent in June. The UAE has one of the world’s highest rates of indebtedness, at US$95,000 per household, banking executives say.

To help keep credit growth in check and prevent consumers and corporations from overstretching themselves, the federal Government passed a law in 2010 to establish the bureau, requiring all banks to participate in giving data.

The bureau’s database of the credit history of all retail borrowers enables banks to build an accurate picture of a potential borrower’s indebtedness, and allows them to assess their ability to honour debt. Previously, banks could not check the credit history of customers relating to other lenders.

Mr Lutfi also said that his staff was working with banks to promote the credit bureau and responsible lending.

Experience in other countries shows that credit bureaus can stop individuals with a poor credit history from amassing further debt while easing the flow of credit to those able to repay loans.

“We’ve done a lot of awareness through banks. They have been very good, hosting a lot of the [bureau’s] banners on their corporate websites,” he said.

Among the international banks now gearing up to work more closely with the bureau is Standard Chartered. The London-based lender said it expected to start using credit-bureau data next month for lending decisions.

“Standard Chartered is in the pilot stage of its bureau implementation,” said Jaydeep Gupta, the Dubai-based regional head of retail clients at the lender. “Back-testing on sample accounts is being conducted to assess the accuracy of the credit reports. The proposed implementation will be next month, after all preparations, processes and concerns have been addressed.”

Most consumer debt is in the form of personal loans and credit cards, and the average resident with debt has two loans, according to statistics from the credit bureau.

The latest bureau figures show that about 3.1 million residents have 6.69 million active loans. Both those numbers are up 10 per cent from the end of December.

A second-quarter survey released this month by the National Bonds Corporation found that more people in the UAE are paying off personal loans. The Dubai-based savings and investment company’s findings showed that 47 per cent of respondents said they made monthly payments towards a personal loan, a 3 percentage point gain from the previous quarter’s survey.

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