Draft Law of Ukraine

"On Organization, Formation and Circulation of Credit Histories"

The draft determines legal and organizational grounds for forming and keeping credit histories, rights of subjects of credit histories, requirements to protection of information making up credit history, the procedure for creating, functioning and liquidating credit history bureau (hereinafter referred to as "the Bureau").

The Bureau is created in the form of a joint stock company.

According to the draft, the Bureau may be founded by legal entities and natural persons. Such founders of the Bureau as legal entities shall function at least for three years since the date of registration thereof and have no debts on taxes and other mandatory payments over the past three years.

The draft also establishes requirements to statutory capital of the Bureau. Particularly, the statutory capital shall be formed exclusively at the expense of pecuniary funds of its founders (share-holders). The statutory capital shall not be lower than UAH 5 mln. The Bureau shall have the right to issue regular nominal shares. The name of the Bureau shall include words "credit history bureau". The Bureau’s activity shall be licensed.

Subject of the Bureau’s activity, according to the draft, is exclusively keeping credit histories and providing services related to processing and analysis of information making up credit history.

The draft establishes principles for forming and accessing information making up credit history, as well as the list of possible participants in the Bureau (banks, credit associations, pawn-shops, insurance companies, etc – hereinafter referred to as "the Participants").

Apart from that, the draft determines the list of information which should make up credit history. Also the draft sets forth that information for forming credit history shall be provided by a Participant to the Bureau only in case there is a written consent of the subject of credit history thereto.

According to provisions of the draft law, a Participant shall have the right to refuse from concluding credit transactions in case the subject of credit history refuses to provide consent for access to its credit history and/or transfer of information to the Bureau on credit transactions with the Participant. Also the Participant shall have the right to turn to the Bureau for obtaining respective information, provided they have a written consent of the subject of credit history thereto and for further use of the obtained information exclusively with the purpose determined by the present draft.

The draft stipulates that the Bureau shall provide the Participant with respective information without the right to transfer it to the third persons; as well provision of such information to the Participant on terms determined by the draft and the Agreement between the Participant and the Bureau shall not be considered violation of banking or commercial secret.

The information transferred by Participants for formation of credit history is to be kept by a respective Bureau within ten years.

Creation of credit history bureaus will stimulate improvement of payment discipline, since its violation influences the quality of credit history. In their turn banks and other financial institutions will have full information on reliability of borrowers. This will provide them with the opportunity to choose among the most reliable and, thus, decrease the risk of non-repaid loans and volumes of respective obligatory reserves. Also, this should reduce the time for registering credit transactions, since the Bureau will have all the necessary information as to reliability of the borrower. In the final count, the draft, if approved, will influence the rate of payments on credit transactions lowering it under the impact of the above-mentioned factors. Thus, approval of the draft will encourage growth of credit volumes.