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Debtors’ blacklist still shocking despite amendment

The number of retail debtors on the “black list” of the Bisz Zrt’s Central Credit Information System (KHR) has significantly declined, but unfortunately not for the right reasons. Due an amendment to the act on Credit Institutions, the system preserves data for only one year after the overdue amount is repaid, instead of the previous five years as of March 2011. The data of those whose debt has been written off will be kept for five years.

Bisz Zrt removed 232,471 records of altogether 98,553 retail debtors in March, thus, defaults in the consumer subsystem declined by approximately 13% as a result of the amendment, the company said on its website. In the corporate subsystem, 75,048 records were deleted.

The Hungarian Banking Association has already said that the amendment could lead to a further deterioration in credit repayment discipline, adding that this is a risk that will increase the banking costs of good debtors.

The latest figures of the KHR are still alarming. At the end of March 2011, 848,000 people were registered on the retail debtor blacklist, down 10% from 939,000 at the end of February. However, the number of those with outstanding debt was up slightly at 784,000.

Compared to the same period in the previous year, the number of bad debtors was up 5.3%, showing that the deterioration of bank portfolios is still underway. As the Swiss franc is expected to remain relatively strong and unemployment to remain high in 2011, bad loan portfolios will continue to hurt bank profits through rising provisions.

The number of defaults and fraud cases was down over 12% to 1.57 million at the end of March 2011, within which outstanding defaults rose by over 1% to 1.43 million from the previous month.

The KHR contains data on retail customers who have failed to meet their loan obligations to any financial institution for more than 90 days and whose debt exceeds the minimum wage. People using false documents to identify themselves, giving false data, or committing bank card fraud are also placed on the list. In order to be removed from the list, consumers must first settle their debt. Once the debt has been repaid, the problem event will remain on record for one year. Following expiry of the retention period, all data will be permanently deleted from the system.