CTOS not legally empowered to formulate credit scores, High Court rules; CTOS to appeal

• “By formulating a credit score the defendant has gone beyond its statutory functions and the plaintiff (Suriati) has suffered a loss as a result of being labelled as a delinquent by the defendant when they have no right to do so.”

KUALA LUMPUR (March 12): Credit reporting agencies, such as CTOS Data Systems Sdn Bhd (CDS), a wholly owned unit of CTOS Digital Bhd, are not legally empowered to formulate credit scores, according to a High Court decision last week.

According to a court document on the eJudgement Management System sighted by The Edge, High Court judge Datuk Akhtar Tahir ordered CDS to pay businesswoman Suriati Mohd Yusuf RM200,000 together with RM50,000 in costs for an inaccurate negative credit rating.

In reaching his decision, Akhtar found that CDS had overstepped its statutory functions under the Credit Reporting Agencies Act 2010 (CRA) in formulating a credit score on Suriati when it was merely to be a database of credit information for its subscribers.

“In the court’s view[,] there is no provision in the [CRA] empowering the defendant (CDS) to formulate a credit score or empowering the defendant to formulate a credit score or empowering the defendant to create its own criteria or percentage to formulate a credit score.

“The defendant is just supposed to be a repository of the credit information to which the subscribers have access,” the judgement dated March 7 read.

“By formulating a credit score the defendant has gone beyond its statutory functions and the plaintiff (Suriati) has suffered a loss as a result of being labelled as a delinquent by the defendant when they have no right to do so,” it added.

In the suit, Suriati alleged that CDS had given her a negative credit rating based on inaccurate information, collated by CDS, which resulted in her being considered not creditworthy leading to personal and business losses.

The inaccurate information that led to the negative included a sum owed by Suriati to WEBE (formerly known as Packet One Networks (M) Sdn Bhd), which she denied owing. Suriati also contended that the credit score was based on “inaccurate criteria which was not updated”.

Akhtar, in his judgement, said that based on evidence that CDS was alerted of the inaccurate information but chose to ignore it, the credit reporting agency breached its duty of care owed to Suriati.

“In the court’s view[,] the least the defendant could have done was to either suspend the information awaiting verification or notify the subscriber or applicants that the information was being verified,” the judgement stated.  

“By choosing to be indifferent even after being alerted by the plaintiff the defendant has clearly breached the duty,” it added.  

According to Akhtar, CTOS' credit scoring criteria include payment history, the amount owed, credit history length, credit mix and new credit.

CTOS to appeal; no material losses anticipated from High Court decision

In a bourse filing on Monday (March 11), CTOS acknowledged the High Court judge’s decision in favour of Suriati but noted that CDS has lodged a notice of appeal to the Court of Appeal.

“There was no material losses anticipated as a result of this matter and no provisions shall be required,” CTOS' filing added.

For the financial year ended Dec 31, 2023 (FY2023), CTOS’ net profit climbed 65% to RM118.37 million against RM71.72 million a year earlier as annual revenue grew 34.2% to RM261.44 million from RM194.78 million previously.

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