Jamaica is in several respects catching up with many first world and developing nations as regards the banking and financial products we offer and the accompanying legislation. There have been a number of recent legal developments, as well as, developments to come which may forever change the way we bank and borrow. A number of these developments are discussed below.
Earlier this year, the Bank of Jamaica (the “BOJ”) issued its Guidelines for Electronic Retail Payment Services (the “Guidelines”) and began accepting applications for authorizations to offer electronic retail payment services. Authorized persons will be able to issue electronic payment instruments, which are in essence devices or mechanisms that enable individuals to make payments for goods or service or transfer money electronically. These Guidelines will therefore facilitate the introduction of what is commonly called “mobile money”.
Mobile money platforms allow users to carry out cashless transactions using their cell phones. Kenya is said to have perhaps the most developed mobile money system in the world with a reported 23,018,500 people, or 74% of the adult population, now using mobile money services. “M-Pesa” or mobile money was launched in Kenya as a mobile phone platform to facilitate basic payment services and secure money transfers. Now, Kenyans can for instance pay for taxis using their cell phones. The technology has reportedly taken off to such an extent that it is has revolutionized the way people do business and spurned many creative start-ups. Kenya is said to be on its way to being a cashless society and many would like to see similar changes happening in Jamaica.
The Guidelines allow for two primary types of electronic retail payment services. The first is Custodian Account Based Payment Services, which is a pre-funded electronic retail service that would allow customers to effect payments from pre-funded accounts. The customer’s funds must be held by the issuer of the electronic payment service in a special purpose trust account, where the issuer is the trustee and customers are the beneficiaries.
The second type of service is the Customer Account Based Payment Service, which is an electronic retail payment service that can only be offered by deposit taking institutions regulated by the BOJ. This service will allow customers to effect payments from their accounts at their respective banks or financial institutions.
As the primary concern of the BOJ is to promote the prudent and safe management of the electronic retail payment system, the Guidelines among other things, require applicants for approval to meet capital and liquidity requirements, mandates certain governance arrangements and operational requirements and requires issuers to put in place measures to promote consumer protection. It has been reported in our local media that a number of entities have applied to the BOJ for approval. It should therefore not be long before making calls will be the least of what we use our mobile phones to do.
Another recent development in our financial landscape is the establishment of credit bureaus. By now, many of you would have seen advertisements and articles about licensed credit bureaus, often referred to as credit reporting companies, now operating in Jamaica. The Credit Reporting Act (the “Act”) was passed in 2010 and it’s Regulations in 2011. Under this Act, companies may apply to become licensed credit bureaus, able to disclose “credit information” about a consumer in return for monetary reward.
Lending institutions no longer have to “take your word for it” when it comes to your credit history. Licensed credit bureaus can now obtain information, referred to as “credit information” such as, that pertaining to a consumer’s financial means, creditworthiness or history of financial transactions (including adverse court judgments); the amount and nature of past and present loans; and the nature of any security previously given for a loan. The credit bureau can then analyze this information and make a conclusion regarding your creditworthiness by arriving at a numerical or alphabetical score.
The credit information may be sourced from entities such as banks, financial institutions, building societies, credit unions, the Development Bank of Jamaica, licensed securities dealers, the National Housing Trust and the Students Loan Bureau. The entities described above are collectively referred to in the Act as “credit information providers”. A credit bureau may in turn disclose the credit information it has obtained to a credit information provider with the written consent of the consumer to which the information pertains. The information obtained by a credit information provider from the credit bureau can then only be used for the purposes outlined in the Act, namely in connection with the extension of credit to the particular consumer.
As more banks and financial institutions begin requesting credit reports before issuing loans and financing, we will all begin to feel the impact of this change in the financial landscape. Your age may no longer be the only number you cannot hide.
Most often when persons approach banks or financial institutions to obtain a loan or credit facilities, these lenders are unwilling to extend such facilities unless the borrower can provide suitable security. It is in the bank’s interest to ensure that the in the event of default by the borrower, it has some asset which it can realize and recover the sums loaned. The optimal form of security is often land. This excludes the mass population from obtaining the very financing that could spur growth and nationwide development.
To this end, the Government has for some time been considering introducing legislation that would increase access to credit facilities by expanding the scope of the types of assets over which security may given through the Security Interests in Personal Property Act (“SIPPA”). The aim of SIPPA, as the name suggests will be to facilitate the creation of security interests in personal property by establishing a process of registration for the recognition of such interests and rules governing priority as regards enforcement. Many are anxiously awaiting the passing of this legislation which may very well provide access to greater economic prosperity for more Jamaicans.
There is yet another ominous legislation on the horizon, being the “omnibus legislation”, bad pun intended. The aim of this legislation is to, among other things, merge the myriad of statutes governing deposit taking institutions, harmonize the obligations of such institutions and update the outdated provisions contained in some of the existing legislation.
It is also hoped that this legislation will meet international standards on governance and transparency while addressing emerging issues such as consumer protection and electronic products. The omnibus legislation will also incorporate new offences for acts such as making fraudulent misrepresentations to obtain a licence, operating or offering deposit taking services to persons resident in Jamaica without a licence and overall establish an enhanced enforcement framework.
In truth, there is nothing threatening or menacing about this omnibus legislation. There are many benefits to be gained from streamlining the laws governing our deposit taking institutions, particularly if this legislative change will simplify the law and make it easier to understand.
As evident from the present developments and those to come, the financial landscape in Jamaica is changing. You can bank on it.
