A letter of non-indebtedness is a letter issued to a customer that has paid off all the debts previously owed to a bank. The letter tells whoever it may concern that the customer has done well to clear all the debts previously recorded that he/she was owing. This letter frees the customer from all debt obligations to the issuer. The issuance of this letter has been a traditional practice in Nigeria; however, it has not helped to reduce the rate of loan defaults neither has it encouraged borrowers to adopt the culture of building a good credit history for themselves.
With the development of Information Technology in Nigeria now and the high rate of information exchanges between lender institutions, banks and other lenders should encourage the use of credit reports for non-indebtedness of their customers. Bank officers should not consider this document as the final arbiter of a credit assessment for their customers especially when approached by these customers for loans, when there are now statutory processes for credit status certification. This way Nigerians will know the importance of building a good credit profile and gradually adhere to regularly repaying their debts as agreed in the documents they signed when they collected loans/credit facilities.
The time has come for every credit customer to be well informed by the officers of lender institutions, at the point of disbursing loans, that there are credit bureaus like CRC in Nigeria now that keep records of all their credit exposures and any negative behavior towards the structure of repayments will be duly reported and kept. Once people are well informed that wrongful transactions with one lender will hinder them from accessing credit from other lenders, they will start to do the right things. There are lots of good people in Nigeria that still love to uphold their good reputation, this knowledge will help them continue doing this credit wise.
It would make sense for the regulatory authorities in Nigeria to remind banks and other lenders to reduce the issuance of letters of non-indebtedness, except when the need is urgent and cases of emergency. It is very clear that, in practice, these letters no longer carry the weight or enforceability that they once did. This is because, if the credit report tells a different story to lenders about a customer with a letter of indebtedness when they carry out credit checks with CRC, the customer would still be considered as credit-exposed and high risk. And still reject his/her loan application.
What is important in today’s information driven society is for a customer’s credit report to reflect the correct and current realities of exposures to credit. One way of staying on top of this information state is for a customer to know his/her credit information status as reported by banks and other lenders. CRC Credit bureau has a suite of products and services that enable customers to do just that.
Visit www.crccreditbureau.com/product/self-enquiry to find out more