Israel Introduces New Credit Information Regime

May 4th 2016

Dear colleagues and friends,

On 12 April 2016 the Knesset (the Israeli parliament) legislated the Credit Information Law, 2016 (the “Law”), the purpose of which is to create a comprehensive regime to govern credit information sharing (including collection of credit information from the various agencies and entities detailed in the Law), as well as to regulate the storage of such credit information in a centralized database operated by the Bank of Israel. Under the Law, credit information may be distributed to credit information bureaus for analysis and further distribution to creditors, while at all times maintaining the privacy of the subject to such information. The Law is aimed at increasing competition in the retail credit market; facilitating better accessibility to credit; reducing social inequality by combating prejudice and discrimination in the extension of credit; and creating a database of unidentifiable information which will serve the Bank of Israel in the discharge of its duties.

Pursuant to the Law, the Bank of Israel will create and be the sole manager of a credit database, which will serve various functions, which include the collection of credit information from various agencies and entities (the Administrator General and Official Receiver; the Execution Office; the Bank of Israel; the court system; the Postal Bank; Banking Corporations; Credit Card Distributors, and others). The Bank of Israel will store credit information in the database and distribute it to credit information bureaus and customers, for purposes consistent with the aims of the Law and in accordance therewith. Such purposes include, inter alia, preparing credit reports (or credit indications) on clients and providing clients with their own credit information. The credit information database will further assist the Bank of Israel in the performance of its duties under the Bank of Israel Law, 2010 (including the duty to cross-reference identifiable information on clients available to the Bank of Israel in accordance with its legal authority); as well as in the creation of a database of unidentifiable credit information that will serve credit information bureaus in the development of statistical models needed in order to provide credit information based services, and in order to prepare credit indications. A central novelty introduced by the Law is found in the ability of the Bank of Israel to collect “positive information” on payment practices of clients, as opposed to the previous law, which only allowed for the collection of “negative information”.

Additionally, the Law permits the establishment of credit information bureaus, which will be the only entities authorized to provide credit information services, in accordance with the terms of their licenses. The credit information bureaus will be authorized, among others, to procure credit information from the Bank of Israel’s database for the purpose of preparing credit reports or credit indications; procuring credit information reports from the Bank of Israel and providing them to clients; and providing other credit information services such as consulting creditors on contractual agreements regarding credit transactions with respect to clients, the terms of the agreement and the estimated efficiency collection measures against debtors; providing services to clients such as creation of client’s credit rating; giving notice of changes to credit ratings and consulting on the client’s financial conduct.

The Law includes certain penalties (unlike the previous law), as well as the ability to impose monetary sanctions for violations of certain provisions.

The Law will come into force 30 months following its legislation. During the interim period, the relevant entities will have time to prepare for the full implementation of the Law (including the creation of the credit information database and means for collecting credit information). Additional regulations will be promulgated in order to regulate the various aspects of the implementation of the Law.

This publication provides general information and should not be used or taken as legal advice for specific situations, which depend on the evaluation of precise factual circumstances.

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