The Irish Credit Bureau (ICB), owned by a group of current and former lenders in the State, has informed users it plans to close down by the year end, triggering concerns among some non-bank lenders that resulting creditworthiness “data gaps” may affect small-business lending.
The ICB, which dates back to 1963, has warned repeatedly in annual reports in recent years that its future is "uncertain", after the Central Bank of Ireland's new Central Credit Register (CCR) was set up and started collecting credit information and issuing credit reports to lenders in 2017.
Although the CCR can hold information for borrowers for five years, lenders are only allowed to see transactions going back two years when viewing its credit reports. The ICB provides access to a borrower's credit history going back five years.
While the ICB allows lenders to look up the credit history of individual directors and shareholders when a business is applying for a loan, the CCR does not.
The Irish Asset and Invoice Finance Association (IAIFA), made up of 25 consumer and SME lenders, wrote to the ICB last month asking for the bureau to continue to provide an “essential” service.
Legacy data
"The IAIFA see significant risk in the legacy data of the ICB being lost, and are adamant that ICB data being made accessible will allow us to continue to be prudent and conscientious lenders until such time as an alternative solution is available via the CCR," the lobby group's chairman, Brian Merrigan, said in the letter, seen by The Irish Times.
The letter highlights the lack of access to information on SME directors, shareholders and guarantors when accessing CCR reports, as well as the limited, two-year lookback on transactions, as leading to potential data gaps when it comes to assessing loan applications.
Sources in the non-bank lending sector said that mainstream banks, which typically have long-standing, multifaceted relationships with customers, will have a competitive edge in the SME lending market as they will have access to borrower information on their own files. It comes as AIB and Bank of Ireland are set to tighten their grip on SME lending as Ulster Bank, the other main player in the sector, is wound down over the coming years.
Post-crash reforms
Mary Leonard, chief executive of the ICB, told The Irish Times that the bureau will stop providing services at some stage in the final three months of the year, with a date yet to be set.
“The Central Credit Register was set up under the Credit Reporting Act 2013 as part of the post-crash reforms. More of the ICB’s members have indicated that they intend to rely on data from this to support their lending decisions instead of the ICB service,” she said.
AIB is the biggest shareholder, with a stake of about 18.6 per cent, according to filings with the Companies Registration Office. Bank of Ireland has a 17.4 per cent stake, while Ulster Bank owns about 15 per cent. Fexco owns 12 per cent, while entities linked to a number of former lenders in the market, including Anglo Irish Bank and Irish Nationwide Building Society, GE and ACC Bank, also retain holdings.
ICB reported profits of €3.9 million on €6.3 million of revenue in 2019 – a profit margin of 61.5 per cent. The company was the subject of a failed sale process in 2010, at a time when its shareholders were looking for €100 million for the business. It also received a bid approach last year, according to its latest report. That proposal was said to have valued the business at about €4 million but did not lead to a deal.
