Law aimed at equality for bank borrowers

PUBLISHED : Wednesday, 14 October, 2009, 12:00am
UPDATED : Wednesday, 14 October, 2009, 12:00am

The central government proposes a ban on credit bureaus and agencies collecting information on a person's ethnicity, family background, religion or political affiliation.

Also banned in a draft law posted on the website of the State Council's Legislative Affairs Office on Monday for public consultation was the gathering of information about a person's appearance, genetics, fingerprints, blood type and medical history.

Lawyers said the move was aimed at preventing financial discrimination based on a person's ethnic background or religion.

'When a dispute arises between, say, a Han Chinese and an ethnic Tibetan, on who deserves a better credit rating while applying for a bank loan, the government will be able to say banks made a decision purely on the person's financial position, based neither on ethnic nor religious background,' Beijing-based lawyer Hao Jinsong said.

Ethnic disparity and religious discrimination were among the issues that led to riots in Tibet in March last year and in Xinjiang in July this year. Many Uygurs in Xinjiang complained it was hard to get even small loans from state banks because of their ethnicity.

Hao said the central government had obviously learned its lessons from the violence. 'Rather than fixing problems afterwards, the government appears to be thinking far ahead this time.'

The draft listed the People's Bank of China, the central bank, as the sole supervisor of credit bureaus or agencies, which need a minimum of 5 million yuan (HK$5.67 million) in registered capital to start up. Credit bureaus can collect financial information on individuals and businesses, but need approval to provide the data to clients.

The mainland does not have clear laws on its credit reference system, a factor that the central bank said hampered the development of a sophisticated credit rating system.

Central bank statistics show that mainland commercial banks were shouldering 4.97 billion yuan in unpaid credit card debt at the end of the first quarter of this year, an increase of 133.1 per cent year on year.

PBOC deputy governor Su Ning said in June that one of the key factors behind unpaid credit card debt was the lack of an effective credit rating system. Having one in place would allow banks to gauge risks before issuing credit.

Efforts to build an effective system started in 1999, and over the past decade the central bank's Credit Reference Centre has collected basic financial data on 14.47 million companies and credit histories of 140 million individuals.

Professor Zhao Xijun , a finance expert at Renmin University, suggested the proposed new law was a reflection of central bank efforts to legitimise its information collection and distribution.

'The draft banned some privacy related issues only because ethnic or religious factors have nothing to do with the central bank's credit reference system,' Zhao said. 'The mechanism cares only about whether you have paid your debts on time.'