Wherever there is the granting of credit or services with the hope of receiving payment after providing such, credit management will be the core feature in the success or demise of that company. In the midst of COVID 19, it is essential for the survival of those companies within the credit industry to implement efficient and effective credit management techniques to mitigate against the increased risks that are present and more prominent due to this global pandemic.
It is apparent that the COVID 19 pandemic will have an impact on the economies of our nations with damaging effects on the credit industry. The shut-down measures implemented globally because of COVID 19 led to a loss of revenue and income for many, the complete closure of business for most which will, in turn, affect the performance of existing loans and servicing of debts. Further, where cash flow and funds are not readily available for individuals to conduct business, then there will be a drawdown on what credit facilities are available to them. Therefore, many institutions found themselves having to facilitate the further extension of credit with a significant decrease in their own cash flow due to the failure of individuals and companies to pay debts during the shutdown. In the United States, it was reported that nearly 15 million credit cards were not paid in April as such, financial hardship programs with deferred payments were allowed.
In such a climate, there is a need to get ahead of potential risks and conduct an analysis of credit portfolios, noting individuals or companies that operate in sectors still viable or those that are consumer-based services that would more than likely be significantly impacted. Understanding the situation at hand is an integral step in beginning to manage credit risk to be faced by financial institutions. It may be also helpful to categorize the industries by risk grades.
Another useful step is to review the financial products being offered as this climate may require additional protection through requesting collateral for higher risk industries or higher deposits. However, in noting the preventative aspect of credit risk management, there will be an increasing need to analyse the creditworthiness of the customer that is seeking credit. It is in this aspect where credit reports which also feature disaster credit scores can aid. In reviewing the standard credit report, individuals would be aware of how a person serviced their debts previously prior to COVID 19 which can serve as a good indication as to how they will service their debts in the future, provided that they have not been significantly affected financially by the pandemic. However, if a disaster credit score is also provided this may present a better idea of how that person has been able to service their debts amidst the crisis. Company policy may then be developed to determine whether allowances would be made for those temporarily affected. Thus by conducting the assessment through an analysis of one’s credit report supported by a review of the background of the client, the industry that they are in, and whether it is one not viable in the present crisis are all measures to employ for managing the credit risks. Institutions may have to question whether the potential client has demonstrated the ability to adapt and transition to meet the circumstances.
On the other side of credit management, the recovery on credit already extended (debt management), ensuring effective consumer dialogue and communication in a manner that notes their concerns but also offers some debt management tips in the active management of their accounts can go a long way. Opening the line for dialogue and communication may ensure that attention is paid to your debts which should in turn, when circumstances permit, result in payments of your debt. As we seek to digitalize and go online, we cannot forget that human relations and interaction still goes a long way.
The month of April is used to celebrate and promote financial literacy and the development of financial skills to effective aid with financial planning, management of personal finances and the navigation of financial concepts in the financial sector. When individuals are equipped with such skills and knowledge, they are likely to be fiscally responsible and financially stable which results in economic growth for societies.
We all operate and interact with the financial sector in some form or fashion, therefore financial literacy is not simply for those who work within that sector. It is therefore recommended that greater emphasis by placed on ensuring the education system adopt a policy to promote financial literacy within the curriculum of the schools starting from the primary level. With such programs in place, the next generation would be empowered to advance financially. However, financial literacy should not be left to the education system, as steps can be taken to promote financial literacy at home within the family such as engaging everyone about spending and budgeting as well as financial planning for the future.
If financial literacy is not adequately promoted in school or within the family, there are simple steps that can be taken to develop or increase your financial literacy.
• Read a book or journal on financial topics
Use the public library or make use of the many free resources online to aid, to develop or enhance your financial literacy and awareness. Take on the challenge of learning and therefore make notes as you go along and seek to apply such knowledge by developing your plans and goals with each chapter or each principle.
• Listen to a podcast on the area
If you do not like to read or may find it difficult to dedicate the time, maybe a podcast would serve as a better tool for developing your financial literacy. A podcast also allows you to listen and intake information while also performing other mundane tasks within the household like washing dishes and therefore for those who have hectic schedules, this can serve as a useful method of learning.
• Subscribe to a financial blog, website or social media pages
Sometimes, reading an entire book could be overwhelming and it may be better to get information in segments, therefore subscribing to a blog or website may prove to be a better method to retain information or seeking guidance and also keep you on track for continuous learning.
• Have discussions
Within your network, there may be someone who has had to deal or is engaging with a particular financial transaction and aspect and therefore from their experience they may have developed and gained a better knowledge or understanding as a result. Do not be afraid to reach out, ask for advice or make queries to find out information.
• Use Financial Management Tools
For those technologically savvy, the use of apps can also provide advice and guidance for managing your finances as well as aid with organisation and accountability.
• Attend a seminar or enroll in a course
Those who have developed a certain level of financial literacy but wish to be more serious and enhance their knowledge may consider taking this step to receive further exposure into new concepts. They can also build connections with experts or those who are similarly seeking to increase their financial literacy to help along the journey to financial wellness.
• Ask Questions, Collect Brochures
As we all interact with the financial world, we also come into contact with experts when we are conducting various transactions. Take this opportunity to find out more information about the particular transaction you are engaging in. Ask questions or for clarification on areas you are unsure about.
It is often recommended that a part of financial literacy or beginning a journey to financial wellness also include an assessment of your credit report. A credit report will provide an overview of your credit history and is the means by which most institutions evaluate your requests for extension to credit. You can visit our page main website www.ccbl.info.tt/ to determine how you can obtain your credit report for review.
In the United States, the Coronavirus Aid, Relief, and Economic Security Act (CARES) was proclaimed on March 27th, 2020. Whilst it may be regarded generally as the stimulus bill as it implements a number of financial relief measures for Americans impacted by the COVID-19 outbreak, it also plays a significant role in guiding those within the credit reporting industry as to how to deal with the adjustments that would have to be made in light of some of the policies that are being implemented by those within the financial and credit market.
The CARES Act has amended Section 1681s-2(a)(1) of the Fair Credit Reporting Act for the United States, modifying it to include the following information:
If a furnisher makes an accommodation with respect to 1 or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make 1 or more payments pursuant to the accommodation, the furnisher shall—
I. report the credit obligation or account as current; or
II. if the credit obligations or account was delinquent before the accommodation—
a. maintain the delinquent status during the period in which the accommodation is in effect; and
b. if the consumer brings the credit obligation or account current during the period described in item (a), report the credit obligation or account as current.
Thus, as consumers have the option to obtain what is being termed accommodations, where they can defer on loan payments or receive loan assistance during the pandemic if certain conditions are met, the lender who applies these accommodations must continue to report the account as “current” if they have fulfilled the terms. In the United States, there is a concern that based on the definition of an accommodation under the Act, which is an agreement to defer one or more payments, make partial payments, forebear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer who is affected by the coronavirus disease 2019 (COVID-19) pandemic, it may not be an automatic process. It is feared that the word agreement indicates an actual agreement to be in place between a lender and each borrower. However, once an accommodation has been made, the requirement to honour these new reporting procedures will continue for 120 days after the end of the COVID-19 national emergency.
The new interim credit reporting standard implemented by the CARES Act was also backed by the United States Consumer Financial Protection Bureau who urged for lenders compliance. This entity also recognized that in such times there would also be the need for flexibility with lenders and credit bureaus with regards to the time necessary to investigate disputes.
In Canada, the major banks have similarly provided relief programs which allow their clients to defer payments up to several months as a result of the impact of COVID 19. The programs often have included a guarantee that the lender will not report the deferral as missed or late payments to negatively affect a customer’s credit rating.
A similar approach is also being taken in Australia. The Australian Banking Association’s CEO, Anna Bligh said “Australia’s banks are here to support customers who have lost their jobs or significantly lost income because of COVID-19, through initiatives such as offering a six-month deferral on mortgage repayments. Customers in these circumstances should not have to worry about their credit rating as well,” “If a customer is granted a deferral on their mortgage and other credit products because of COVID-19, banks will report customers as not having missed a repayment, provided they were all up to date when granted relief.” However in Australia, as it relates to pre-existing delinquent accounts, it was indicated that for those customers who were already behind but received a deferral due to COVID-19, the banks will not report the repayment history information, but will leave the field blank for the deferral period. Once this period has ended, the bank will determine how to report the repayment history information.
Some have supported the concept of having a notation to indicate that you were affected by a natural or declared disaster and the generation of a disaster code. A disaster code could make a difference if a lender actually reads the full credit report when making a decision, such as in hand-underwriting, says Ed Mierzwinski, senior director, Federal Consumer Program at the U.S. Public Interest Research Group, a consumer advocacy group.
Creditinfo (Barbados) Limited also recognizes the difficult circumstances that many are faced as a result of COVID 19. We too have already begun to contact and survey our subscribers to determine what measures they have in place to accommodate their clients. We will be seeking to implement similar measures to ensure that accommodations made by those within the financial sector are truly that, accommodations, and therefore we will also seek to implement measures and procedures to ensure that such would not affect your standard credit report.
The world has been rocked by a Catastrophic, Ominous, Vast Immobilizing Disaster- The pandemic COVID 19.
It would appear that at the same rate this highly contagious virus has made its imprint and spread to affect over 2 million humans across the world, to date, and even some animal life, a similarly infectious effect is being suffered in all business sectors globally as a result of the measures that are deemed necessary to attempt to contain the spread of the virus. Many countries have implemented physical distancing requirements, curfews or lockdowns limiting and reducing our normal daily activities, our jobs and traditional means of trade and commerce.
For many, we have already begun to feel the economic “symptoms” of this virus and with the growing uncertainty, the pressure is building.
Within the financial sector, many Central Banks after reviewing the charts and noting the initial warnings signs, have sought to administer an initial dose of treatment by adjusting their policy rates to preserve the stability of the financial markets.
In Barbados, the Central Bank announced a series of measures (effective April 1, 2020) to help support commercial banks and other deposit-taking institution manage the economic fallout from the coronavirus shock. Financial institutions in recognizing the initial prognosis made for the financial markets due to the impact of the pandemic have also implemented measures to aid their customers. Some have given
- Automatically upon request, a moratorium on loan payments for firms and individuals directly impacted by the pandemic and resulting economic downturn for up to six months;
- An automatic three-month payment deferral on credit facilities or waivers of credit card late fees and over limits fees;
- Adjusted loan terms to reduce monthly payments and improve cash flows or interest rates;
- Additional credit to existing customers to address short-term liquidity challenges through a temporary increase of overdraft and credit card limits
The Government of Barbados has strategized on a number of remedies to prevent the financial collapse and rupture of the arteries of our society due to the COVID 19 pandemic.
OUR CITIZENS – THE UNEMPLOYED AND VULNERABLE HOUSEHOLDS
The government has offered an injection of much needed cash relief through the National Insurance Scheme (NIS) unemployment fund to aid those who would have been laid off due to the measures to address the spread of COVID 19. Further, a $20-million Household Program was launched to help approximately 1,500 vulnerable families as identified by the Household Mitigation Department. Under this stimulus package, the government will be able to provide $600 per month to each family through the Welfare Department and a 40 per cent increase in all rates and fees paid by the Welfare Department to individuals.
There has also been a call by the government on the private sector and those families that earn more than $100,000 annually to also assist through the Adopt Our Families’ programme launched at CIBC First Caribbean Bank.
OUR BUSINESS SECTOR AND EMPLOYERS – THE IMMOBLISED
For business, there is the launch Jobs, Investment and Business Survival Programme, to assist those businesses whose operations have been immobilized by the COVID-19 outbreak through investment from Government to renovate and upgrade for the re-opening of their businesses.
For those employers who would be seeking to also cushion the impact for their employees, the National Insurance Scheme employer’s contributions would be waived for businesses that retain three -quarters of their staff for three months with the preparation to extend in the event that crisis continues beyond the three-month period.
OUR HOTEL AND ENTERTAINMENT INDUSTRY – THE DISRUPTED
With specific reference to the hotel sector, in light of the expected downturn in the tourism by as much as 80%, the government will refinance the Small Hotel Investment Fund with $20 million to allow small hotels to borrow “and blend with other funds” and refurbish their properties during the down period, and they will pay an interest rate of 3.5 per cent instead of five per cent. This fund was initially established to assist small hotels with marketing, management, procurement of joint services and refurbishment
In its General Press Release of the 30th of March 2020, The Central Bank of Barbados indicated that its measures coupled with those of the Government and the commercial banks represent a multi-pronged response to dampen the effects of COVID-19, and should help to preserve financial stability and enable a faster turn-around in the economy once the crisis is over.
In reviewing the reports and prognosis for our economy, it is apparent that our recovery from COVID 19 requires a holistic approach. While we implement measures of physical distancing, following along a quote by Jon Bon Jovi, we are as strong as our neighbour and therefore we are our brother’s keeper. We need to Collaborate Overcome Virtually Innovate and Deliberate, together to tackle COVID 19.
A credit bureau also known as a credit reporting agency is an entity which collects, maintains or otherwise processes credit information based on your credit accounts and reflects your credit history and payment patterns into the form of a credit report or credit score. This report or score is in turn distributed to your potential lenders and you. Thus, the main aspect of a credit bureau service is the gathering and the distribution of information relating to your financial performance and service of debts.
The credit information being collected from your creditors may include the amount of any loans, credit transactions or any other facilities granted to you, the payment history, the amounts due to be paid, the balances, the date for the last payment and the amounts. This credit information is attached to your credit profile which will also include basic identification information such as your name, an unique identifier like the national identification number to adequately identify each individual consumers and contact details. By combining such information, a credit report or score is generated to efficiently aid with the lending decision.
Credit reporting benefits both lenders and consumers. It can help increase your access to credit as it provides lenders and creditors with reliable information to determine your creditworthiness and serves as a guide to determine whether credit should be extended and, if so, under what terms.
Therefore, a credit bureau serves as an integral aspect of a finance industry and economy as it facilitates greater access to financial services by consumers. In earlier times, lending practices were based on the banking relationship and familiarity with the consumer and further premised on the provision of security. However, with the presence of a credit reporting system, lending institutions can extend credit base on the information available on the credit report, effectively pre-screen the risks, if any, that may be involved in extending credit. With the risks or lack thereof identified or the uncertainty pertaining to a new applicant erased by a review of their credit report, there can be more flexibility in lending practices and the terms imposed for the extension of credit. There may be no need for security or collateral in order to secure repayment. Where there is an increase in a consumer’s ability to borrow money, there is usually a corresponding increase in economic growth.
Therefore, as our slogan indicates Make Credit Work for You! Do not hesitate to contact us to find out how you can obtain your credit reportMar 262020
In the United States, the 21st of March 2020 marks National Credit Card Reduction Day. This is a day established to promote the assessment of one’s level of indebtedness due to credit card use and the strategies to reduce or eliminate such indebtedness. While statistics show that Americans’ credit card debt totalled $930 billion in the fourth quarter of 2019, we know that credit card debt and the concerns regarding such isn’t simply an American thing. Therefore, in recognition of this day, here are some tips that you can employ to reduced or avoid credit card debt, a negative credit report and ultimately MAKE CREDIT WORK FOR YOU!
1. Yes, you may have a credit limit, but remember your real limit which is the amount of money you would be able to repay at the end of the month or on your credit card due date. Evaluate your finances and always remember that after you swipe the card, you still have to find the money to repay the card so budget, budget, budget.
2. Be organized! Have your credit card bills available, go through your transactions, check your balance every two weeks so you don’t lose track and compare with your savings or budget, set alerts for your payment due dates.
3. The only automatic set up should be the automatic deductions for the repayment of the credit card to avoid late payments and interest. You should always try to clear off the total balance at the end of each cycle or pay double the monthly minimum payment. If these steps may be too challenging, set up the deductions for at least the minimum payment. Beware of automatic charges by merchants, iTunes, Netflix etc. Avoid saving your credit card information on such accounts or erase and delete if you have already done so. Close the subscription accounts that you do not need.
4. If a lump sum payment at the end of the month is daunting, try making smaller payments more frequently. This will be reducing the amount the interest is being calculated on.
5. Don’t be afraid to ask your financial institution to freeze your credit, seek help or negotiate.
The recognition of a day to promote and support consumers rights and issues has its origins from a groundbreaking special message to the US Congress by President John F Kennedy on the 15th day of March 1962. This is viewed as the first time a President truly addressed the issue of consumer rights. At the basis of his message was the resounding fact that all of us are consumers. Whilst consumers represent the largest economic group, it is the only group in the economy that are not effectively organized and at times lack adequate representation. This speech sparked the creation of Consumers International whose objective is to fight for fair, safe and sustainable future from consumers. In 1983 there was the creation of Consumer Rights Day.
This year 2020, the theme is The Sustainable Consumer. With the recent initiative regarding the ban on plastics and such other environmental measures, it is clear why this theme was chosen. There is a need for a global effort to call for changes to avert environmental breakdown and create fair social conditions for current and future generations. At the heart of this effort, which Consumer International has also adopted, is the attempt to empower consumers to make sustainable choices and practice sustainable consumption as well as to demand sustainable production in response to the global crises of climate change and biodiversity loss. With such practices implemented, there can be global and continued access to essential goods and services and a fair global standard of living for all. This is the basis of sustainable development, development which meets the needs of the present without compromising the ability of future generations to meet their own needs.
The principles of consumer rights should permeate throughout all aspects. Thus, even as it relates to sustainability, there is a need for consumers to be educated on the environmental, social and economic consequences of consumer choice and have available clear and reliable information in order to make well-informed decisions as it relates to their consumption and lifestyle. Education and information empower and enable consumer choice. The right to choose is another principle, as consumers, wherever possible, should have access to a variety of products and services at competitive prices with an assurance of satisfactory quality and service at fair prices.
The United Nations has made certain recommendations on the governmental approach that should be adopted to ensure the promotion and protection of consumers’ economic interest along with sustainable development. Whilst still maintaining the standard concepts to ensure the safety and quality of consumer goods and service, it is suggested that government should implement policies to enable consumers to obtain optimum benefit from their economic resources. This would involve ensuring satisfactory production, ensuring after-sales service and spare parts, implementing performance standards which demand durability, utility and reliability.
Further, it is recommended that there should be the promotion of consumer access to non-misleading information about the environmental impact of products and services by using methods such as eco-labelling schemes, product information hotlines, product profiles, environmental reports by industry, and information centres for consumers.
In offering our services as a credit bureau, we too seek to implement sustainable practices by having electronic and online services to reduce the use of paper. As a credit bureau, our nature of business is indeed consumer-centric, thus we go beyond the concept of sustainability and also attempt to ensure the fundamental principles of consumer rights govern the way we do business. We have implemented policies to promote consumer awareness, ensuring that the right to be informed and educated is present, we also grant the right to dispute and challenge any inaccuracies within our credit reports.
We support the initiatives for Consumers Rights day and invite you to continue to follow our blog to find out more about consumers rights within the credit reporting system.