Can CTOS Formulate Credit Scores? Court of Appeal Overturns High Court Decision

In our earlier article, we discussed the High Court’s ruling that CTOS had no power to formulate credit scores. That decision has since been overturned by the Court of Appeal.

CASE UPDATE: CTOS Data Systems Sdn Bhd v. Suriati Mohd Yusof [2024] 9 CLJ 839

BRIEF FACTS:

The Plaintiff brought a claim against CTOS alleging that inaccurate credit information and a low credit score had affected her reputation and prevented her from obtaining financing. The disputed information concerned an outstanding debt to Webe Digital Sdn Bhd.

The High Court allowed her claim and awarded RM200,000 in general damages. CTOS appealed.

DECISION:

The Court of Appeal allowed CTOS’s appeal and set aside the High Court’s order, finding, among others, that: –

1. Credit reporting may include credit scores. The statutory definition of credit reporting encompasses information bearing on a customer’s eligibility for credit. The Court recognised that credit reporting agencies may provide this information through a credit score. Here, the credit score was calculated by software using algorithms without human intervention, and there was no evidence that the rejection of the car loan was premised on a low credit score.
2. The debt information was true. The Plaintiff had admitted her indebtedness to Webe. That indebtedness had also been determined in a separate action against Webe, which was not appealed. The issue could not be reopened in the proceedings against CTOS, and the defamation claim could not succeed on information that was substantially true.
3. Negligence was not established. On the circumstances of this case, the Court found that CTOS did not owe the asserted duty of care to the Plaintiff. Even assuming such a duty existed, there was no breach because the debt information was accurate.
4. The claim had to remain within its pleaded scope. Breach of statutory duty had not been specifically pleaded, and the High Court should not have made a finding on that basis.

The Plaintiff’s cross-appeal was also dismissed.

WHAT’S NEXT:

There are a few practical takeaways from this decision: –

• Identify what is actually wrong with the report. A low credit score alone does not establish wrongdoing. An affected person should identify the particular debt, payment status or other information said to be inaccurate and retain supporting records.
• Address the underlying debt with the relevant creditor. Where the dispute concerns information supplied by a creditor, correspondence with that creditor and CTOS will help clarify the disputed entry and the correction sought.
• Keep evidence of the financing decision. If a claim is based on a rejected loan, obtain and preserve the bank’s explanation where available. The rejection itself does not establish that CTOS caused it.
• Consider earlier proceedings before bringing another claim. An issue already determined in an earlier case may prevent a party from disputing it again against a different defendant.
• The decision does not give credit reporting agencies unrestricted freedom to use inaccurate information. Section 29 of the Credit Reporting Agencies Act 2010 requires reasonable steps to ensure the accuracy of information used or further processed. A claim must nevertheless identify the relevant obligation, the breach and the resulting loss.

Credit Reporting Agencies — Ministry of Finance