Tech on Tec

During class discussion of the Mexican economic crisis of the 1990s last week, we identified several contributing factors, including the drastic increase of credit extended from commercial banks to the private sector, which exacerbated the current account imbalance. Part of the problem in the credit market arose from the lack of a strong, efficient Mexican credit bureau. Because banks and other lending institutions had no means to gather and share information about their clients, consumers could open new credit accounts even after defaulting on previous loans. However, in the last ten years, several international and domestic credit information companies (CICs) have begun to flourish within the country, and government policies have evolved alongside them to improve the quantity and quality of consumer information.

The official Mexican credit bureau is comprised of three main CICs, each of which interacts with the Comision Nacional Bancaria and the national bank to streamline regulation and to promote awareness of the importance of credit reporting in budding economies.

The first of these CICs, TransUnion de Mexico, is a subsidiary of TransUnion and Fair Isaac, two of the leading US firms that offer credit scoring, decision management, fraud detection, credit risk analysis, and other services to financial institutions. TransUnion de Mexico deals with physical individuals’ credit information, a relatively new aspect of the consumer information business in Mexico. Only in 2002 did Congress pass a law called the Law Regulating CICs (Ley para Regular las Sociedades de Información Crediticia), or CBIL, allowing individuals to request and view their own credit score. Before the CBIL, the only regulations governing CICs were three loose provisions in the Law Regulating Financial Groups (Ley para Regular las Agrupaciones Financieras). Under the old law, lending institutions were required to show individuals their credit report after their loan application was denied. Other than that, individuals had almost no way to view their credit information or to ascertain its accuracy.

The other portion of the credit bureau is controlled by a private firm called Dun & Bradstreet de Mexico, a subsidiary of Dun & Bradstreet and TransUnion corporations. This firm deals with the information of corporations and other large entities.

As we have seen with the lack of consumer-rights legislation, the Mexican government does not play a large role in forming standards for CICs. Instead, the Buro de Credito has been conforming with standards regulated by international organizations like ISO, an organization comprised of delegates from 157 different countries that meets in Geneva to set standards for various industries. The Buro has also conformed to standards set by the Norma de Excelencia de Centros de Contacto (NECC). Many of these standards govern general administrative and business practices in addition to privacy concerns, which one would expect with a consumer information database. By conforming to international standards rather than only fulfilling the bare-bones regulations of the Mexican government, the Buro increases its international credibility and allows Mexican firms to compete internationally.

A second source of credit information, not officially aligned with the Buro, is Elektra, primarily known as an electronics and household goods retail store. However, by offering credit to their consumers for furniture, televisions, and washing machines—goods smaller than cars and houses—Elektra incorporates into the market a lower-class portion of the Mexican population that would otherwise be ignored by the Buro.