THE UPDATE SCOOP (#5/2024)
Duty of Care owed by CTOS │ Tort
CTOS not legally empowered to formulate credit scores
By TAY & HELEN WONG – April 22, 2024
It is common knowledge in the business community in Malaysia that CTOS Data Systems Sdn Bhd (CTOS) is tasked, under the Credit Reporting Agencies Act 2010 (the 2010 Act), with collating credit reports from various sources including Bank Negara and other agencies for the purpose of dissemination to subscribers which included financial institutions. In a landmark decision, the High Court in Suriati Mohd Yusof v CTOS Data Systems Sdn Bhd [2024] 3 MLRH 688 held that the defendant, CTOS owed a duty of care to verify and provide accurate credit information not only to the financial institutions but also to persons concerned to whom the information was related. It was further held that CTOS had no power under the 2010 Act to formulate credit scores.
In the instant case, due to a negative report from CTOS, the plaintiff’s loan application was rejected. The plaintiff had subsequently discovered that the data collated by CTOS was inaccurate and false. Despite alert by the plaintiff that the information against her was inaccurate, CTOS chose to ignore and continued to maintain the said data. CTOS had also given the plaintiff a low credit score based on inaccurate un-updated criteria. Both the inaccurate information and wrong credit score had resulted in the plaintiff to be considered as “serious delinquent” leading to the rejection of the loan application and losses suffered by the plaintiff.
In deciding in favour of the plaintiff, the learned Judge rejected CTOS’ defence that the duty was on the recipient of the credit information to independently verify such information and that its role was merely to collate the information and not to verify its accuracy. CTOS did owe a duty of care to the plaintiff to provide accurate credit information. CTOS had clearly breached such duty by choosing to be indifferent even after being alert.
Further, the High Court remarked that CTOS was merely a repository of the credit information to which subscribers had access. It was not empowered under the 2010 Act to formulate a credit score or create its own criteria or percentage to formulate a credit score. By doing so, it had gone beyond its statutory functions.
The plaintiff succeeded in negligence and was awarded RM200,000 as general damages and RM50,000 as costs.
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Tags: [negligence] [credit reporting] [credit score] [Credit Reporting Agencies Act 2010] [creditworthiness] [Malaysia]