First credit data sharing system edges closer to launch

The Bank of Israel has been collecting credit data in a manner that will enable it to begin database activity since August 31, 2018.

By
March 5, 2019 17:02
3 minute read.
Israelis walk past a branch of Bank Leumi in Tel Aviv

Israelis walk past a branch of Bank Leumi in Tel Aviv. (photo credit: REUTERS/GIL COHEN MAGEN)

 
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Israel’s first-ever system for sharing credit data, featuring the establishment of a central credit register, took one step closer to its mid-April launch on Tuesday as the Bank of Israel presented the initiative to the public.

In accordance with the 2016 Credit Data Law, the Bank of Israel collects data from credit providers and government authorities and will transfer them – only if the customer consents – through credit bureaus to credit providers authorized to use the data (lenders) and customers (borrowers) themselves.

The law was passed by the Knesset in order to increase competition in the retail credit market, currently dominated by Bank Hapoalim and Bank Leumi, expand access to credit and reduce discrimination in the granting of credit. The Bank of Israel will also benefit from an anonymous information database to carry out research.

Until today, credit data for borrowers always been retained by the lending institution alone, usually the customer’s bank. Those who opt to use the new credit register will now be able to share those details with competing lenders and generate an individual credit rating for both borrowing and personal use.

The Bank of Israel has been collecting credit data in a manner that will enable it to begin database activity since August 31, 2018.

As part of the public information initiative, the Bank of Israel has launched a dedicated website (www.creditdata.org.il) and a video campaign. Details regarding the database will be published in Hebrew, Arabic, Amharit and Russian.

“We expect that within a short period of time, upon completion of preparations by various entities for activity according to the new system, the credit data system will increase competition in the area of credit and will significantly change the rules of the game in the retail credit market,” said Tzuriel Tamam, the Bank of Israel’s supervisor of credit data sharing.

“The system will enable customers to receive more worthwhile value propositions and they will be able to manage their actions in an informed manner, and increase their bargaining power versus various lenders when they take credit.”

In order to ensure privacy, the Credit Data Law enables customers to independently access, once a year without charge, all information gathered on him or her, and to transfer it to entities that will provide the customer with advice regarding his or her credit-related financial management.


Customers may also limit the transfer of all or some credit data to credit providers of their choice or all institutions, and also request the deletion of all data on the register.

In a further effort to ensure competition in the financial sector, the Knesset also passed the Increasing Competition in Banking Law in 2016 requiring Bank Leumi and Bank Hapoalim to sell the credit card companies under their ownership by January 2020, or reduce their holdings to below 40% if the companies are issued on the stock exchange.

Last week, global private equity firm Warburg Pincus announced that it had completed the acquisition of Leumi Card in a deal worth NIS 2.5 billion, in collaboration with Menorah Mivtachim, Clal Insurance & Finance and Allied Group.

Under a wider strategic restructuring process currently underway at the company, Leumi Card officially rebranded and changed its name to “max” on Tuesday.

In the coming days, a large-scale campaign will be launched to display the new name and branding, with the company set to be marketed as “max by Leumi Card” for the next twelve months.

“While the entire financial sector in Israel, and the credit card sector in particular, is undergoing a revolution, we have become the first credit company to pave the way for managerial independence and are on the way to establishing and expanding the Israeli non-bank market,” said max CEO Ron Fainaro.

“We thank Leumi for the years during which Leumi Card became a leading and competitive actor, and we are saying farewell in favor of an independent journey which will make the financial market more advanced and competitive.”

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