Wednesday, June 15, 2011

Constitutionality of 'Confidential" Credit Information Report in Pakistan

By Yasser Latif Hamdani

The State Bank of Pakistan (“State Bank”) in its document Understanding Credit Information Bureau Consumer Awareness Program (available on the State Bank’s website) says:

“Disclosure to third party is strictly prohibited under the law. Thus individuals and corporate entities are not entitled to obtain their credit information reports.”

The State Bank bases this contention on Sections 25-A and 33-A of the Banking Companies’ Ordinance 1962 (“BCO”), and Sections 8 and 17 of the Freedom of Information Ordinance 2002 (“FOIO”).  This contention is based on a misreading – deliberate or otherwise- of the above-stated provisions.

1.       First there is no reference to a third party in any of the aforesaid provisions.
2.       Second third party is a generic term indicating a person who is not party to a transaction but affected by it. Even if it is conceded that for the limited purpose of Credit Information Report (“CIR”), a borrower constitutes a “third party”, the aforesaid statement finds no support in law. The statute confers on the State Bank discretion vis a vis the CIR which is to be exercised in the prescribed confines of law and constitution. In other words, it is a discretion fettered by constitutional rights of citizens and persons.

Section 25-A of the BCO in the relevant portion says:

“(2) Any credit information furnished by the State Bank to a banking company under sub-section (1) shall be treated as confidential and shall not, except for the purposes of this section or with prior permission of the State Bank, be published or otherwise disclosed

(3)No Court, Tribunal or other authority, including an officer of Government shall require the State Bank or any banking company to disclose any information furnished to, or supplied by, the State Bank under this section”.

Under Subsection (2) it is clear that State Bank can permit such information to be published or otherwise disclosed. (3) makes information with State Bank privileged. It does not however create an absolute bar on the State Bank not to disclose. On the contrary it seems illogical- and patently unconstitutional- to withhold such information from a customer or a borrower.

In the aforesaid document from the State Bank’s website, there occurs this interesting question and response in frequently asked questions section:

“The financial institution that extracted CIR is not providing me with a copy. Can I get a copy of my CIR directly from the CIB?

No. Presently, under the provision of law, only member financial institutions have online access to eCIB servers for generating CIB of borrowers for their internal use. The CIR is a confidential document and cannot be provided to the borrowers.”

Interestingly this addresses the issue of the provision of CIB by Financial Institutions to the borrower in a roundabout fashion by not clarifying what the State Bank would do if the Financial Institutions were to provide the customer with a copy. It will be observed from sub-section (2) aforesaid that the State Bank has the ability to permit publication and disclosure otherwise.

State Bank’s present construction of 25 A of BCO is a violation of Fundamental Rights:

This would in my view militate against fundamental rights namely Articles 10-A, 18, 19, 19-A, 23 and 25 of the Constitution of Islamic Republic of Pakistan (“Constitution”).

Article 10-A gives a person the unfettered right to fair trial and due process for determination of his civil rights. This obviously is violated when a person is disallowed the right to see evidence upon which he is being proceeded against. Without conceding that State Bank has any judicial authority (itself a question of constitutional nicety), the CIR does affect the civil rights of a person significantly. For example the CIR becomes the basis for placing people on Exit Control List, which affects the fundamental right of movement.

Article 18 gives a citizen the freedom of trade, business or profession. By affecting the credit history of an individual citizen – without the knowledge of an individual citizen- the construction of 25-A of BCO by State Bank affects and limits a citizen’s freedom of trade, business or profession. Creditworthiness is one of those material things by which an individual measures his worth and by rendering him unworthy – again without his knowledge and without according him the right to respond- the CIR condemns a person unheard and destroys this fundamental freedom.

Article 19 gives a citizen the freedom of speech and expression, which abridged if the citizen cannot as an individual express his point of view regarding something as substantial as his creditworthiness and defend himself against being condemned without his knowledge, which is what CIR does.

Article 19-A gives a citizen the right to have access to information of public importance. This article is wide in scope and applies to many issues of fundamental importance to public at large. It stands to reason then that the same rule applies to where an important piece of information directly affecting the civil rights of a citizen is withheld from him.

Article 23 gives a citizen the right to acquire, hold and dispose of property. This right is abridged when a CIR – confidentially and without the citizen’s knowledge- renders a citizen –hypothetically speaking- credit unworthy.

Article 25 guarantees equality of citizens before law. This equality is abridged when a citizen is not allowed to even seek the evidence that exists against him.

Meanwhile Section 33-A of the BCO says:

“(1) Subject to sub-section (4), every bank and financial institution shall, except otherwise required by law, observe the practices and usage customary among bankers and, in particular, shall not divulge any information relating to the affairs of its customers except in circumstances in which it is, in accordance with law, practice and usage customary among bankers, necessary or appropriate for a bank to divulge such information”

This creates an obligation on all financial institutions and banks to keep confidential information pertaining to their customers.  It cannot however mean that they cannot share the same information with the customers because if this was to be construed as such It cannot however for reasons already mentioned be taken to mean that this information will not be shared with the customer itself. Is it the State Bank’s position that its customers are financial institutions alone? This would constitute a very limited and narrow construction because the State Bank performs several functions in the public policy sphere for the people of Pakistan which leaves this construction untenable. On the face of it becomes very hard to argue that this construction in any way represents the intent or the wisdom of the legislature. This is especially true considering subsection (4) which allows the State Bank to publish a list of persons to whom any loans, advances or credits were extended by a bank or a financial institution during the time of General Elections, presumably, for public knowledge about candidates standing for public office. To then think that there would be a bar against  giving information to an individual citizen or person is preposterous.

The statute at best gives the State Bank discretion about public disclosure vis a vis CIR. This cannot extend to the borrower in light of the newly added Articles 10-A and 19-A and are otherwise in violation of constitutional fundamental rights ensured by the Constitution under Articles 18, 23 and 25. In other countries- such as the United States of America- a person can seek one’s credit information report and therefore this bar is not keeping with international practice.

Similarly there is nothing in FOIO that prohibits such disclosure. Section 8 contains document exempt from disclosure. The relevant subsection 8(d) of the FOIO reads:

“record of the banking companies and financial institutions relating to the accounts of their customers”.

Meanwhile Section 17 of the FOIO reads:

“Information is exempt if its disclosure under this Ordinance would involve invasion of the privacy of an indentifiable, individual (including individual) other than the requester.” (Emphasis added).

It is clear that these provisions exist to preserve the privacy of an individual and not to deny the individual access to his own record.

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