Ministry finds that a positive credit registry would lower interest rates | New

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The register would provide creditors with an overview of a potential customer’s existing obligations with all financial institutions that join the system. This could help prevent people from accumulating debts that they cannot repay.

“This would reflect all of the customer’s financial obligations – home loans, various credit cards, consumer loans – with the goal being that all of these credit providers share their information en masse to enable others to make more informed decisions and not to provide the consumer with too much credit,” said Tarmo Ulla, head of private banking at Swedbank.

The register would constitute a gigantic database which would be subject to data leaks. Thomas Auväärt, head of the finance ministry’s financial markets department, said malicious advertising should be seen as another potential risk.

“The ministry wants to avoid the register being used to offer even more loans to people, with banks or other lending institutions targeting those willing to borrow,” he suggested.

That said, the ministry thinks the registry could lead to lower interest rates and streamline lending.

The Ministry of Finance hopes to have the necessary legal basis for the register by next year. The platform itself could be finished by 2024.

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.

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