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In essence, the Credit Reporting Act ("CRA") provides a legal setting for the sharing of credit information between credit bureaux and creditors (e.g. banks) and other credit providers, such as telecommunications firms and retail traders. Before the issuance of the CRA, credit bureaux were governed only by the Central Bank of Nigeria ('CBN') Credit Bureau and Credit Bureau-Related Transaction Guidance for Nigeria ('the Guidance'), which was last revised in 2013.

The common readings emphasised above are an effort by the government to give legal assistance to those who wish to exercise their due care in relation to debtors and, at the same place, to allow small companies that have carefully managed their debt to fall back on their credit histories in order to gain greater investment opportunities, which remain crucial to economic recovery.

One of the aims of the new law, as set out in Section 1(e) of the Act, is "to foster accountability in the credit markets by promoting accountable lending, preventing over-indebtedness and the fulfilment of consumer pecuniary commitments, and deterring ruthless lending by lenders and consumer breaches of contract".

CRAs shall grant the right to run credit bureaux only to those firms authorised by the CBN. Therefore, businesses wishing to run credit bureaux must obtain the appropriate license from the CBN. Pursuant to Section 2 (2) of the Rating Agency, the application for a license must be submitted in written form to the CBN Governor and be provided with all documentation and information requested by the Governor.

A clear consequence of this rule is that it now prohibits individual credit bureaus from running credit bureaus, as previously permitted by the Guidelines. According to Section 3 of the CRA, the authorised credit bureaus are authorised to establish and operate a credit and credit-related information base which may be collected, aggregated or assembled by credit information service suppliers, credit information user and other entities required by the CBN.

Credit bureaus may, at the creditor's application, also draw up credit statements and examine intended debtors, but may not give an opinion on the credit standing of the individuals analyzed when drawing up their credit statements. It is important to note that Section 3(3)(b)(c) requires credit bureaus not only to make sure that the credit information contained in their databases is kept up to date on a regular basis, but also to check it, which should enhance the trust of credit bureaus, such as banking institutes and other credit institutes, who try to trust this information.

Since the provision of credit information involves the processing and exchanging of a large amount of confidential information, Section 3(3)(e) of the Act requires the credit rating agency to impose a binding obligation on credit bureaux to conclude a contract for the exchanging of information with credit information holders before passing on credit information to those creditors.

However, an exemption is provided for creditors who have obtained the agreement of the person concerned (potential borrower) in written or other form. In addition, the CRA provides for other safeguards in Section 6, as well as the right of the individual concerned to have litigation information included in a credit report and requests rectification, while Section 9(1) also safeguards the right of the individual concerned to'data security, confidentiality and safeguarding of their credit information'.

" However, by the provisions of 9 (3), a credit bureau may, at the CBN's prior requirement in writing, provide information about a data subject to another individual who acts in response to a judicial order or where such information is prescribed by statute. It would not be necessary for the data subject's agreement if the credit agency complied with the Act in one of these cases.

Although the general objective of the credit rating agency is to improve credit availability, the permitted uses for which a credit information seeker may obtain this information are quite broad, as provided for in Section 7 of the Act. The permitted uses set out in 7(2)(a) - (m) include: examining an applicant's credit applications or evaluating a person's qualifications to be a creditor; loan renewals or restructurings; subscribing to, renewing or revising policyholders; conducting work reviews of staff or potential staff; evaluating the creditworthiness of a potential lessee in any rental agreement or contract.

CBN's regulation of credit bureaux is maintained in Section 8 of the CRA and includes the authority to withdraw licenses from credit bureaux that violate the Act and to take measures to safeguard the interests of data subject from misuse in credit disclosure.

Section 13 of the CBN also authorises the rating agency to handle claims from data subject if these claims have been handled either unsubmittently or inadequately by a credit agency or credit information service within 10 (ten) working days. 17.2.2008 C 24/6 The CBN is also authorised by Section 13 of the rating agency to handle claims from data subject if these claims have been handled unsubmittently or unsubmittently by a credit agency or credit information service institution within 10 (ten) workingdays. If the CBN also does not solve the matter within 10 (ten), the person concerned may appeal to the courts to remedy the situation.

Through the transition and approval of the rating agency, the legislature and government executives of the German government have taken pro-active steps to facilitate credit for Nigerians working in companies, especially small and medium-sized one. In particular, the CRA has highlighted such issues as restricted credit exposure for certain groups of potential lenders and default due to the absence of accountable credit from some lenders.

By way of corrective measure, the Act has established a sound credit information gathering mechanism for enabling lenders to evaluate, inter alia, intended debtors. By establishing this frameworks, the CRA will facilitate the gathering of credit bureaus' own information, but will also include privacy and dispute settlement safeguards.

This is therefore praiseworthy piece of good law and a very welcome complement to Nigeria's current credit policy frameworks. Hopefully, the CBN will remain effective in its regulatory capacity and that, in cooperation with the government and other interest groups, the CBN will provide sufficient funds and funds to raise awareness among the proposed recipients of the validity and usefulness of the new regulatory regime....

Attorneys with more than 30 (thirty) years of experience in providing corporate finance advisory services on funding opportunities and impacts, we recommend that lenders and debtors wishing to do credit rating agency dealings look for appropriate guidance to ensure that they do not fall behind regulative compliancy and the associated outcomes. Economic operators wishing to obtain clarification in this respect and other questions mentioned above may therefore approach any of our branches or the various communications media used in this report.