Hong Kong Strengthens Oversight of Consumer Credit Data System
Efforts to ensure data security, promote competition, and enhance operational resilience in credit reference services.
Hong Kong’s "Credit Data Smart" (CDS) platform, launched in April 2024, serves as the backbone of the city’s consumer credit reference system under the Multiple Credit Reference Agencies Model.
In a written reply to the Legislative Council, Secretary for Financial Services and the Treasury, Mr. Christopher Hui, outlined measures to bolster the platform’s security, competition, and accessibility.
Ensuring Data Security Following Operator Exit
The exit of Nova Credit Limited, one of the platform’s credit reference agencies (CRAs), in July 2024 raised concerns about data security.
To address this, the Hong Kong Monetary Authority (HKMA) required the Industry Associations overseeing the CDS to appoint an independent consultant to monitor Nova’s exit process.
The consultant confirmed the destruction of all consumer credit data downloaded by Nova, a move endorsed by the Office of the Privacy Commissioner for Personal Data (PCPD).
Promoting Competition and Resilience
Currently, multiple CRAs operate under CDS, with the HKMA collaborating with industry associations to ensure competition and avoid a single point of failure.
To enhance resilience, retail banks and digital banks must engage with at least two CRAs by January 2025, ensuring seamless switching if required.
Approximately 90 licensed money lenders, representing 75% of the unsecured personal loan market, have joined or are in the process of joining CDS.
Standardizing and Protecting Data
The CDS mandates standardized data formats for all participants, with specifications set by the Industry Associations’ MCRA User Group.
All consumer credit data is encrypted to international standards, and only authorized CRAs and subscribers can decrypt it.
Data handling adheres to the Privacy Commissioner’s Code of Practice on Consumer Credit Data and the Personal Data (Privacy) Ordinance.
Addressing Costs and Technical Barriers
Some financial institutions have expressed concerns about high costs and technical barriers to accessing the CDS.
To mitigate these issues, the HKMA has supported the development of the "Common Module," a lower-cost interface for institutions to connect to the platform.
This initiative aims to encourage broader participation, ensuring a more comprehensive credit database.
Potential Designation as Critical Infrastructure
Under the pending Protection of Critical Infrastructure (Computer Systems) Bill, banking and financial services may be designated as critical infrastructure.
This designation would include CDS, ensuring heightened protection and oversight given its vital role in Hong Kong’s economy.
Preventing Cross-Boundary Data Transfer
Service agreements prohibit CRAs from transferring consumer credit data outside Hong Kong unless explicitly authorized by the consumer.
The HKMA has directed banks to regularly monitor CRA compliance with these requirements.
Future Directions
The HKMA and Industry Associations remain committed to enhancing the CDS framework through competition, secure data handling, and operational resilience.
By fostering participation and maintaining rigorous oversight, Hong Kong aims to solidify its position as a global leader in consumer credit reference services, balancing innovation with robust consumer protection.
In a written reply to the Legislative Council, Secretary for Financial Services and the Treasury, Mr. Christopher Hui, outlined measures to bolster the platform’s security, competition, and accessibility.
Ensuring Data Security Following Operator Exit
The exit of Nova Credit Limited, one of the platform’s credit reference agencies (CRAs), in July 2024 raised concerns about data security.
To address this, the Hong Kong Monetary Authority (HKMA) required the Industry Associations overseeing the CDS to appoint an independent consultant to monitor Nova’s exit process.
The consultant confirmed the destruction of all consumer credit data downloaded by Nova, a move endorsed by the Office of the Privacy Commissioner for Personal Data (PCPD).
Promoting Competition and Resilience
Currently, multiple CRAs operate under CDS, with the HKMA collaborating with industry associations to ensure competition and avoid a single point of failure.
To enhance resilience, retail banks and digital banks must engage with at least two CRAs by January 2025, ensuring seamless switching if required.
Approximately 90 licensed money lenders, representing 75% of the unsecured personal loan market, have joined or are in the process of joining CDS.
Standardizing and Protecting Data
The CDS mandates standardized data formats for all participants, with specifications set by the Industry Associations’ MCRA User Group.
All consumer credit data is encrypted to international standards, and only authorized CRAs and subscribers can decrypt it.
Data handling adheres to the Privacy Commissioner’s Code of Practice on Consumer Credit Data and the Personal Data (Privacy) Ordinance.
Addressing Costs and Technical Barriers
Some financial institutions have expressed concerns about high costs and technical barriers to accessing the CDS.
To mitigate these issues, the HKMA has supported the development of the "Common Module," a lower-cost interface for institutions to connect to the platform.
This initiative aims to encourage broader participation, ensuring a more comprehensive credit database.
Potential Designation as Critical Infrastructure
Under the pending Protection of Critical Infrastructure (Computer Systems) Bill, banking and financial services may be designated as critical infrastructure.
This designation would include CDS, ensuring heightened protection and oversight given its vital role in Hong Kong’s economy.
Preventing Cross-Boundary Data Transfer
Service agreements prohibit CRAs from transferring consumer credit data outside Hong Kong unless explicitly authorized by the consumer.
The HKMA has directed banks to regularly monitor CRA compliance with these requirements.
Future Directions
The HKMA and Industry Associations remain committed to enhancing the CDS framework through competition, secure data handling, and operational resilience.
By fostering participation and maintaining rigorous oversight, Hong Kong aims to solidify its position as a global leader in consumer credit reference services, balancing innovation with robust consumer protection.
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