KUALA LUMPUR (March 12): CTOS Digital Bhd on Tuesday said it is business as usual for the group as the recent court decision against its subsidiary does not prevent it from continuing to provide credit score services.
“Regardless of the timing of this case, we will continue to operate and provide the information to financial institutions and clients,” group chief executive officer Erick Hamburger told a media briefing.
The High Court last week decided in favour of a businesswoman, Suriati Mohd Yusuf, in a negligence and breach of fiduciary duty suit she brought against CTOS’ wholly owned unit CTOS Data Systems Sdn Bhd (CDS). The court ruled that CDS had overstepped its statutory functions under the Credit Reporting Agencies Act 2010 (CRA) in formulating a credit score as the company was merely a database of credit information for its subscribers.
CDS CEO Eric Chin, who also spoke at the media briefing, insisted that the company is allowed to provide credit scores under the CRA, based on the Act’s definition of credit reporting business, credit information and credit report.
Chin said CDS' management had a meeting earlier on Tuesday with its regulator — the Registrar Office of Credit Reporting Agencies under the Ministry of Finance — to provide an update on the legal case, and highlight its role in providing credit scores as well as credit services.
"At no point in time [during the meeting] was there any indication that we are not allowed to provide [the services],” he said.
Hamburger said credit reporting is a highly regulated industry, and CTOS is audited by the regulators annually.
“Our renewal happens every year upon the regulator reviewing all of our products, all of our procedures, and they are approved by the Registrar Office before they are launched to the market.
“In this particular case of the credit score, we have been in the market for more than 10 years with this product. We have co-created this with the data from Bank Negara Malaysia and other sources of information. So, it is under the purview of the CRA that we are allowed to provide this score,” said the CTOS group CEO.
What the Act says
Under the CRA, the credit reporting business is defined as “a business that involves the processing of credit information for the purpose of providing a credit report to another person, whether for profit, reward or otherwise, but shall not include the processing of credit information — (a) for the purpose of discharging regulatory functions or that is required or authorised by or under any law; or (b) by a credit rating agency”.
Meanwhile, credit information is defined as “any information of a customer collected by a credit provider in the course of or in connection with the providing of credit, or any record or information of a customer processed in the course of or in connection with the carrying on of a credit reporting business”.
The CRA defined credit report as “any record or information, whether in a written, oral or other form, that (a) has any bearing on a customer’s (i) eligibility to be provided with credit; (ii) history in relation to credit; or (iii) capacity to repay credit; and (b) is used, has been used or is capable of being used as one of the factors in establishing a customer’s eligibility for credit”.
'Ruling extends beyond defamation'
Commenting on the court's decision, Hamburger said it had allegedly gone beyond the issue of whether CTOS had defamed Suriati.
“This particular case is a defamation case brought up by the plaintiff, and the ruling that has been provided by the judge extends beyond the defamation itself and actually goes and extends to alluding that CTOS does not have the legal approval to provide credit scoring,” he said.
Chin revealed that CTOS has won 12 defamation cases in the past, and has five more pending, with the latest lawsuit having been filed in July last year.
“When it comes to defamation cases, our track record is pretty clear, with the exception of this existing case, which gives us solid ground for an appeal,” he said.
According to Hamburger, the information provided by CTOS is accurate and backed by proper evidence and documentation.
“That's the basis of our appeal, because we have all the documentation and the evidence that we followed the procedure, that the information is correct," he said.
In the suit, Suriati alleged that CDS had given her a negative credit rating based on inaccurate information collated by the company, which resulted in her being considered not creditworthy leading to personal and business losses.
She said the inaccurate information that led to the negative rating included the claim that she owed money to WEBE (formerly known as Packet One Networks (M) Sdn Bhd), which she denied. Suriati also contended that the credit score was based on “inaccurate criteria which was not updated”.
Judge Datuk Akhtar Tahir, in his judgement, said that based on the evidence that CDS was alerted of the inaccurate information but chose to ignore it, the credit reporting agency is deemed to have breached its duty of care owed to Suriati. He ordered CDS to pay her RM200,000 together with RM50,000 in costs.
Shares of CTOS succumbed to selling pressure on Tuesday, closing 20 sen or 14% lower at RM1.25, valuing the group at RM2.89 billion.