“Right now, when making a loan, the lender may not know how many miscellaneous financial commitments an individual has already made,” Pentus-Rosimannus explained. “This has unfortunately led to over-indebtedness. The data exchange platform to be set up is a step towards the joint exchange of information between lenders to avoid this.”
Currently, lenders receive information regarding overdue, i.e. overdue, payments before making lending decisions, but they may lack aggregate information regarding all of a potential borrower’s financial obligations, which may include credit, loans and purchases made with payment plans.
Creditors are also not obliged to exchange this information. Nevertheless, creditors are legally bound to lend responsibly.
A total of 100 different creditors providing loans to individuals currently operate in Estonia. When making lending decisions, a bank or other creditor may not be aware of all of a borrower’s existing financial obligations. Bank statements may reflect payments made on existing loans, but people often have multiple bank accounts, which they may not disclose to lenders.
According to the plan of the Ministry of Finance, a central register of loans in Estonia could be designed in such a way that it would be maintained by the private sector, and that all banks and other creditors should report data on loan obligations to the data exchange platform. Then, before making a loan decision, a creditor would submit a request to the central registry.
The platform, referred to in the ministry as the Positive Credit Register, would also help support the work of debt advisers, as debt advisers often start by mapping a debtor’s situation.
“With the help of the registry, this step could be solved much faster in the future, allowing [them] focus on eliminating their debt,” the ministry said.