Saturday, March 28, 2009

A cutting from the STAR 'Feast On IT'

CTOS’ God-Given Rights

Watching how the CTOS saga is unraveling has been rather fun - and exasperating. What is happening is an assault on the basic rights of individuals and it his happening because of the absence of a proper regulatory framework for those who peddle financial information on individuals.

The stance taken by CTOS makes it look like that they have a god-given right to create and keep forever a database that contains the financial background and (credit) repayment history of any individual in Malaysia if such information has been extracted from sources in the public domain. Chung Tze Keong, the CEO of CTOS, said “The information we have is already easily available to the public from other avenues — government gazettes, newspapers, Companies Commission, Insolvency Department, Registrar of Societies and others. This is information which the public has access to.” –NST July 1, 2007.

Now then, can Joe Public demand that the information, good or bad, pertaining to him be deleted from the CTOS database? The short answer is no. Chung had this to say, “You can’t remove your name unless it is there by fraud or mistake. But you can update your records and prove to your credit grantors that you are a good paymaster and worthy of credit. The CTOS database is merely a history of your financial status. He further adds:“Even if you have settled your loans, your historical payment records still remain with us.”

Deputy Minister in the Prime Minister’s Department, Datuk M. Kayveas, has asked CTOS to show proof that the Company has obtained their vast amount of information legally. The answer seems to be fairly clear per Chung; there is no need to show any proof since the information is in the public domain. Further, there is no existing law that can force them to erase the information. A Malaysian citizen has no right to have his name removed from the CTOS database and this is one of the rewards after 50 years of independence.

When Chung asserts that CTOS is nothing more than “just a company dealing with the collation and dissemination of information”, he is right on cue. It is the silly politicians who have failed to grasp the reason for their existence.  But when he says “Our records are factually a true representation of the subject’s history” he, understandably, omits to mention that CTOS shall in no way be responsible for updating any record and this is precisely the cause of so many complaints and unhappiness out there. And the banks are fully aware of this shortcoming yet they keep on calling for the reports and rejecting loan applications because of outdated information. Now CTOS invites anyone to make use of their free Self Check service ( to give your side of the untold story. So if you have made settlement on a debt but it is not reflected in CTOS, you can have them update by providing the necessary documentary proof. One could sum up the philosophy applied here: We make the money; you take the trouble or suffer the consequences.

Apparently, CTOS has been rewarded handsomely for their efforts at extracting information from the public domain, with no responsibility as to its ultimate correctness, and keeping it for re-use until, I suppose, the individual concerned dies. I would hope they routinely scan the obituaries to delete those who have gone over to the other side, so to speak.

Frankly, I was astounded when I read that the company made as much as RM80 million per year (Kayveas, NST July 8, 2007) although this probably refers to gross fee income before operating expenditure. But the business must be very lucrative. As Chung proffers(NST July 1, 2007): “Out of every 100 enquiries made on the CTOS system, 94 are without any legal action associated with them; three with legal action but can show settlement or give satisfactory explanations; and the balance with legal action and unable to show settlement or give satisfactory explanations.” So if Mr. X has never borrowed a sen in his life from any bank, it is unlikely that his name will have surfaced in the public domain. That sounds probably right and so when he finally goes to borrow from a bank, nothing should show up in the CTOS database. Good for Mr. X and good for CTOS as well because they bank will still have to pay for the search. God forbid if Mr. X has to fork out the fee! Just collect and disseminate information for mega bucks. Even rocket scientists are not so well remunerated. There is not much I can claim to know but this much is likely to happen: Chung and his fellow shareholders will cry buckets if CTOS gets canned.

Ironically, a company that exists to report on whether people have been goody two-shoes in their financial affairs is itself guilty of misbehavior. The Companies’ Commission has charged the company, its directors and company for their failure to submit annual reports, holding AGMs and giving a copy of the AGMs from 2003 to last year. One would think a company that makes good money must surely have the resources to put such mundane and routine matters in order. So is there something that they wish to keep out of the public domain (forgive the pun Mr. Chung) for as long as they can?

So there you have it. Now what can the Government or Datuk Kayveas or any Minister or even the Prime Minister do next? Making grandstanding statements should not be one. For example, Datuk Kayveas has reportedly said that
CTOS’ actions were inconsistent with its Memorandum of Articles of Association and the Banking and Financial Institutions Act 1989 as it had not stated that it was collecting information for sale (NST July 8, 2007).  Good heavens, what does Datuk Kayveas think CTOS had in mind? How can CTOS pay the staff and the directors’ huge emoluments and their nice cars if they did not earn anything? But kudos to Datuk Kayveas for making this fight.

Another example is the call by Domestic Trade and Consumer Affairs Minister Datuk Mohd Shafie Apdal on all financial institutions and banks to stop using CTOS for credit reference for loan applicants and instead use the service provided by Bank Negara through its Central Credit Reference Information System (CCRIS) which was more accurate. One wonders why the banks would still flock to CTOS if CCRIS was so efficient in the first place. Last heard, CTOS has 13 miilion records versus much less in CCRIS.

Let’s face it squarely that credit referral agencies do have a role to play. They have existed for decades all over the world with famous names like Dunn and Bradstreet to name one. Darshan Singh, the National Consumer Complaints Centre Director, concedes that the credit reporting business has a valid one role in any economy although he added that they should be guided by principles and regulations. He further said that "The guiding principles of credit reporting of privacy, accuracy and fairness must be there. Our credit reference agencies have experienced severe criticism as these three principles are lacking."  I think Darshan makes good sense.

Here is what I believe should happen:

  1. The government should clarify what rights citizens have. Why can’t a citizen compel CTOS to remove references on him? Of course the citizen may never succeed in his loan applications but that is his choice. Why should CTOS be allowed to have this seemingly god-given right to include anyone it wants in their database and refuse to remove it?
  1. The government should formulate sensible rules for companies like CTOS and specify that the onus is on them to ensure that that information on the loan applicant is updated or face the consequences if the dissemination of outdated information causes grief to the applicant. Remember that CTOS is not doing it for free and that the applicant should be reachable as he or she must surely have the latest contact information to the bank concerned. So make them earn their living instead of just regurgitating information.
  1. Seriously consider whether the information should be provided from within the government in a proper and efficient manner. So much of the needed information comes from within the authorities, especially the courts. So why not create the necessary databases that are easily searchable via the internet (service available to licensed financial institutions and any other organization approved by the relevant ministry and accessed via password control)? Thus there will be a database on persons who have been declared bankrupt and another for those who have settled their loans.  Perhaps even a database on outstanding civil suits against individuals and corporations. This can be a self financing project because the banks will still be charged for the service. All that is required is proper interaction between the government departments concerned to make this work and trained staff to carry out the various functions.