Independent review and analysis

Data: An Asset or a Liability?

Over the course of the last 5 years, we have seen numerous examples where data integrity issues have resulted in delays in the transfer of loan portfolios and in some cases that has meant significant reductions in pricing.

Other implications of holding poor data which is not updated or verified on a regular basis include problems when trying to maximise the collection strategies of loan portfolios, particularly with non-performing loans (NPLs).

So the holding of accurate data can be regarded as added value to the asset, applying to holders or sellers of a mortgage or loan portfolio.

But this asset can turn quickly into a liability, as Data Protection Law in Spain and Portugal is strict and fines for data breaches can be significant. As an example, last year in Spain 30 companies were fined over €2.7m for failures in data protection.

The Spanish Data Protection Agency (AEPD) commonly applies a tactic of inspecting companies that have had complaints recorded against them. When debtors recognise that, some have been known to adopt strategies to avoid maintaining payments, including filing a complaint at the AEPD. This increases the likelihood of inspection of any of the lending companies involved, with the result of further delays in the collections process and in some cases, suspension of collections activity.

As a result, significant risks exist in data integrity collection and recording systems. To mitigate that risk, we recommend early auditing of existing portfolios. As part of that process we can help to identify if there are issues that need to be addressed and corrected in the individual records as well as carrying out a review of the complete data collection and compliance process.

If these risks are not recognised, the resultant investigation and potential fines applied by the regulator can be painful and costly.

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