The Government is proposing to amend legislation that will allow the inclusion of controversial information in comprehensive consumer credit reporting.
The Attorney-General has announced proposed changes to the Privacy Act and its comprehensive credit reporting (CCR) scheme to allow details of hardship arrangements.
Attorney-General, Christian Porter says: “Proposed changes to the Privacy Act will make sensible changes to allow for transparent and responsible lending practices where people are subject to hardship arrangements.”
Currently the Privacy Act mandates that creditor hardship arrangement information will not be passed on to the other credit providers.
The changes aim to assist those who are struggling with their existing credit and have other lines of credit and information will show when there has been an agreed variation to a credit contract but will not contribute to the credit score.
Porter says: “The amendments will benefit consumers by making sure credit products are suitable, and ensuring consumers are encouraged to seek hardship arrangements if they are struggling to meet repayments under their credit contract.”
Gerard Brody, chief executive of Consumer Action Law Centre disagrees and considers that the risks are greater than the benefits.
Brody says: “Consumers are concerned about listings on their credit reports, knowing that it may impact their access to credit in the future. Our concern is people will not want to seek hardship from their lender if that fact ends up on their credit report.”
Porter says: “Importantly, while hardship information will appear on a consumer’s credit report, credit reporting bodies will be prohibited from using hardship information to calculate a consumer’s credit score.”
Draft legislation will be released for public consultation on the changes which will identify when a hardship arrangement is in place and if a borrower is making payments in line with the arrangement.
Brody says: “The lender should already know outstanding liabilities both through their own assessments but credit liability information is already on credit reports. They don’t need additional hardship information to know what the consumer’s outstanding liabilities are.”
Since the introduction of CCR in 2014, credit providers have been able to add the following additional information to credit files:
- the date a credit account was opened;
- the type of credit account opened;
- the date a credit account was closed;
- the current limit of each open credit account; and
- repayment performance history, including information about late payments.
Surprisingly, consumer awareness still remains low and according to Mike Laing, chief executive of the Australian Retail Credit Association (ARCA), only one in three consumers are aware that credit reporting has changed.
Laing says: “Our research has found that while awareness has actually increased 11 per cent from last year, less than 1 in 3 consumers are aware that credit reporting has changed.”
All this data is provided to credit reporting agencies Equifax, Experian and illion, and can be used as a reference by banks and other lenders when a consumer applies for credit.
CCR has developed slowly in Australia, largely because the big banks did not develop their systems until the government threatened them with the National Consumer Credit Protection Amendment (Mandatory Comprehensive Credit Reporting) Bill 2018.
The bill lapsed when it was not passed in Parliament before the election but the banks have started to take this up and by September this year, comprehensive credit information for 80 per cent of consumer loan accounts will be available.