The phrase “better bad known than good to know” also applies to the bank. To approve a loan, financial institutions review the credit history of their clients and at that point it suits them to have some background, even if it is a bad payer, to have no information.
This situation worries the bank. The Productive Development Law, which has been in effect since August 23, establishes that natural or legal persons with past due credits in public or private financial entities, whose securities are canceled within 90 days, may clean up their credit history.
On September 14, the Superintendency of Banks issued a circular for the application of the provision and states that it applies for transactions due up to 24 months ago to the validity of the law.
In case people fall back into arrears, says the provision, it returns to restore the deleted information.
In past weeks, the Minister of Economy and Finance, Richard Martinez, said that more than 300,000 people are in category E in the credit bureau and the risk center. To them, if they pay, they will be allowed to have access to new credits.
For the legal director of the Association of Private Banks of Ecuador (Asobanca), Marco Rodríguez, the measure complicates the work of credit evaluators, who require the greatest amount of information to define the risk.
“The one that grants the credit has less tools to evaluate properly and what can happen (…) is adverse selection. Given the lack of information, because you know in advance that the law eliminated information, you will prefer to give it to someone you know, “says Rodríguez.
The legal director of Asobanca assures that representatives of some entities have already approached the Superintendency of Banks to explain what would be the inconvenience of deleting the data. However, they have not yet had an answer about their concern.
The credit bureau
Currently, if the client does not pay his debt in a bank or commercial house, the credit bureau will punish him with ratings ranging from A to E, along with an analysis score of up to 800 points. The Law of Productive Development allows eliminating bad grades.
The credit bureau is a portal in which financial institutions or commercial houses enter to see the history of the behavior in the credits that have been granted to the applicant. Currently in Ecuador, the US firm Equifax handles credit information. (I)