The Australian Competition and Consumer Commission (ACCC) has released a proposal to help facilitate comprehensive credit reporting, which will help foster competition and allow lenders to make better lending decisions.
Reforms to the Privacy Act in March 2014 expanded the types of information on consumer credit that can be shared among lenders, to include positive data such as account repayment history. Prior to March 2014, the Australian credit reporting regime permitted the collection of negative data only such as credit defaults.
The ACCC has now proposed to grant authorisation for five years to the Australian Retail Credit Association (ARCA) in relation to principles for exchanging comprehensive consumer credit data between signatory credit reporting bodies and lenders. ARCA represents lenders and credit reporting bodies in Australia.
The ACCC’s acting chair Delia Rickard says the regulator has received a large number of submissions from the industry in response to the application for authorisation, with general support for the application which will help lenders make better lending decisions.
“Better consumer credit information will allow lenders to make better credit decisions, with resulting benefits for consumers in the form of more competition among lenders and greater financial inclusion for consumers as well as less over-indebtedness,” she said.
“The ACCC considers that the provisions will help overcome a reluctance in the industry to share consumer credit information, facilitating a more complete exchange between credit providers and each credit reporting body. This will lead to increased competition both between credit reporting bodies and between lenders and assist lenders to comply with their responsible lending obligations at less cost.”
The ACCC is seeking submissions from interested parties in relation to its draft determination, before making a final decision.
The introduction of comprehensive credit reporting was recommended in David Murray's Financial System Inquiry (FSI).
More comprehensive sharing of credit data would reduce information imbalances between lenders and borrowers. It would also facilitate borrowers switching between lenders and greater competition among lenders. Overall, more comprehensive credit reporting would likely improve credit conditions for borrowers, including SMEs. Personal credit history is a major factor in credit providers’ decisions to lend to consumers, but also to new business ventures and smaller firms,” the final FSI report stated.