[BusinessWorld] Makati RTC nullifies CIC order on credit data required from insurers

Source: BusinessWorld

A LOWER COURT nullified an order from the Credit Information Corp. (CIC) requiring insurers to submit data on premium payments, insurance contracts, and policy loans of its clients.

The Makati Regional Trial Court (RTC) Branch 56 nullified the Circular Letter 2017-04 issued by the CIC in a decision dated Jan. 4, 2019, acting on the Petition for Declaratory Relief by the Philippine Life Insurance Association, Inc. (PLIA), the Insurance Commission (IC) said in a statement on Tuesday.

In the decision, the lower court declared that premium payments, insurance contracts and policy loans are not within the ambit of basic credit data required to be submitted under the Credit Information System Act (CISA).

The court added that such financial records do not pertain to a borrower’s performance on a loan, credit line, guarantee, or any other form of financial accommodation.

Basic credit data refer to positive or negative information provided by a borrower to a submitting entity or a firm that provides credit facilities.

“Taking out a policy loan may or may not reflect a need for cash by the policyholder. Availing of the same is the sole option of the policyholder as it is a benefit feature of the insurance policy granted to him by law. He may use it any which way and whenever he wants to,” the court’s decision read, citing PLIA’s arguments

The court likewise ruled against the argument of the CIC that the submission of policy loans, premium payments and insurance contracts is not a violation of the Data Privacy Act (DPA).

“Notably, CIC cannot rely on the foregoing exemption under the DPA applicable because policy loans, premium payments and insurance contracts do not constitute basic credit data.”

Insurance Commissioner Dennis B. Funa welcomed the court ruling, saying the IC has long been trying to explain that the aforementioned financial records are not credit data.

“The decision of the Makati RTC supports our stance that policy loans should not be treated as reportable credit transactions under the Credit Information System Act,” Mr. Funa was quoted as saying in the statement.

“[A]ll our arguments have fallen on deaf ears… The CIC dismissed all our arguments by

simply invoking that the same are bereft of probative value in relation to the coverage of the CISA. It was at this instance that the PLIA was forced to elevate the issue before the court.”

the CISA. It was at this instance that the PLIA was forced to elevate the issue before the court.”

Sought for comment, the CIC said it will look at “various options” after the Makati court dismissed the circular.

“We haven’t received the ruling yet but like any other court case, we have various options. We can bring it back to court through an appeal or we could go straight to the Supreme Court,” CIC President and Chief Executive Officer Jaime Casto Jose P. Garchitorena said in a phone interview.

He added that the credit information firm will also consult with the Office of the Government Corporate Council, the statutory law office of state-owned and -controlled corporations.

Mr. Garchitorena also stood firm on the CIC’s position that premium payments, insurance contracts and policy loans can be regarded as credit data.

“The law provides that we can identify types of data that may speak to the creditworthiness of an individual. One of the characteristics of payment is the regularity of the behavior,” he said.

“Similar to payment of utilities in terms of the period of the payment, any type of regular payments reflect to the capacity of the data subject…to pay an obligation,” Mr. Garchitorena added.

Enacted in 2008, Republic Act No. 9510 or the CISA mandates the establishment of a comprehensive and centralized credit information system, with CIC tasked to consolidate the data.

The law also states that submitting entities or lenders are required to provide all credit data of their borrowers in their database to the CIC.

Meanwhile, PLIA has not replied to a request for comment as of press time.

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