Central Bank of Kenya Governor Dr Patrick Njoroge has warned bank CEO of dire consequences.

Central Bank of Kenya (CBK) Governor Patrick Njoroge has hinted at changes in the banking law to reform how banks use customers’ credit ratings.

Dr Njoroge said on Thursday players in the sector were working on reforms on credit information sharing and how banks use data on customers’ credit history, especially from Credit Reference Bureaus (CRBs) to price loans.

CBK also wants banks to use technology in collecting customer information that could determine whether they are good borrowers and if so get cheaper loans instead of treating them with ‘a broad brush’ where good borrowers pay for the mistakes of bad borrowers.

“CBK will support this vision by creating an enabling legal and regulatory framework to expand the sources of credit information and ensure its accuracy and effective resolution of customer complaints,” Dr Njoroge told the Kenya Bankers Association 6th Annual Banking Research Conference in Nairobi.

“We are embarking on the next step of improving this whole framework, the details of this will be revealed in the sort of a sequential fashion. The important thing is to ensure that banks are using it positively and also negatively,” he added.

Related: Just how safe is credit reference bureau information?

CRBs are associated with threats to list those who delay making even the smallest of loan repayments. Dr Njoroge said with the change in the law, this would change.

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“At this point as you know it is used as a blacklisting tool, you do not get the benefit of performance and that is really one of the things we are looking at,” he said.

On August 10 last year, CBK’s Director of Bank Supervision Gerald Nyaoma wrote to banks warning them not to deny customer loans as a result of negative listing by CRBs.

“Complaints have been raised that banks are outrightly denying customers’ credit on the basis of adverse listing. It was never the intention to use the credit information sharing mechanism as a blacking mechanism but as a risk management tool,” said Mr Nyaoma in the circular.

He also warned lenders who have been sending messages threatening to list customers for non-credit matters that this practice was against the law. Initially, banks could even list a customer who had abandoned an account that attracted ledger fees.

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