Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 5, 1995 TAG: 9504060035
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
Just as they were beginning to get accustomed to buying U.S. goods with plastic, Mexico's middle class got walloped by a financial crisis that halved the peso's value and jacked up interest rates.
Now they have a new U.S. import to worry about: credit-reporting companies are setting up shop in Mexico to collect data on debtors.
Three leading U.S. credit bureaus, accused a few years ago of bungling reports and giving out bad data, will be keeping track of who's paying their bills and who isn't with sophisticated computer databases, replacing an inadequate credit-check system controlled by Mexico's largest banks.
The three firms - Trans Union Corp., TRW Information Services Inc. and Equifax Corp. - started making plans to enter Mexico more than a year ago. In February, the Mexican government passed regulations allowing foreign companies to apply for credit bureau licenses.
TRW, backed by a group of Mexican investors, hopes to begin operations in July. Trans Union two weeks ago announced a joint venture with the Mexican Bankers Association. Equifax formed a Mexican subsidiary six weeks ago.
To build their databases, the companies must sign up clients - mostly banks and retailers - who will agree to supply credit data in exchange for obtaining reports on customers who have applied for loans or credit cards.
Their entrance into Mexico coincides with the financial crisis triggered by the Dec. 21 peso devaluation. The crunch is hitting Mexicans in their wallets, and some are expected to have problems paying off their credit-card loans and mortgages in coming months.
For those who keep up with their payments, the new tracking systems will be a boon, because consumers can build good credit records. Right now, Mexico's only credit agency - run by banks - keeps records of those who've defaulted on payments.
Assembling accurate credit reports won't be easy; Mexicans don't use Social Security numbers, an important tracking tool, and many people have the same last name.
What's more, TRW and Equifax officials think they'll have trouble getting data from the main source of consumer credit information - Mexico's largest banks, which control the lion's share of the credit-card market and operate Mexico's only credit reporting agency.
Despite their own mixed record on credit reporting, the U.S. firms vow to keep fair and accurate records.
``We'll use the same sorts of safeguards as we do in the U.S. to make certain that the information is only communicated to the people that are allowed to get it,'' said Tom Collins, director general of Equifax's Mexican subsidiary.
Both TRW's Orange, Calif., credit bureau subsidiary and Atlanta-based Equifax came under fire for making mistakes on consumers' credit records, failing to correct the errors and giving reports to people who weren't supposed to have them.
Thousands of people - some with horror stories about being denied credit because of mistakes in their files - complained to the Federal Trade Commission, which launched investigations.
Both companies settled charges with the FTC, agreeing to maintain accurate reports and adhere to other consumer protections.
Trans Union, meanwhile, ran into trouble with the FTC for selling consumer names to target marketers. The FTC ordered the company to stop. The company is fighting the action in court.
Trans Union declined to comment through a spokeswoman.
Although Mexico doesn't have U.S.-style fair-credit-reporting laws that specify how credit reports can be used, officials say Mexicans are protected by new regulations governing credit bureaus, which are even tougher than U.S. laws. Credit bureaus are required to obtain consumers' signatures before giving out records.
The U.S. newcomers may be in for a rough ride themselves. With interest rates hovering around 100 percent, fewer people will be applying for credit, which will dampen demand for credit reports.
Nevertheless, Mexico is still considered an attractive emerging consumer market. The country has 12 million credit card holders out of a population of 90 million.
by CNB