Is positive credit reporting a flawed deal?

by Miklos Bolza20 Oct 2017
The move towards more comprehensive credit reporting may be beneficial on the surface, but one legal expert has warned that it will have negative impacts on consumers and won't solve a root issue in the reporting process. 

While regulators and credit providers have been singing the praises of this expanded credit reporting regime, it won't improve the number of inaccuracies in the data collected by credit reporting agencies, Joseph Trimarchi, solicitor at Joseph Trimarchi & Associates told Australian Broker.

“It’s not their fault,” he noted. “They are the custodians of the systems and the information they collect is the information fed to them by credit providers.”

What is lacking is a more precise method of recording this information, he said.

“What we find is that the level of inaccuracies that exist on credit files hasn’t diminished. Those mistakes are still there.”

This is a systematic issue caused by the way credit reporting has been structured since its inception in Australia. While the Privacy Act legislates credit reporting, it does not have an enforcement arm to ensure information is correct, Trimarchi said.

Around 70-80% of lenders are accurate in their listings, he added, with the remainder causing issues for consumers. These inaccuracies existed prior to comprehensive credit reporting and will exist afterwards, he said. 

“The information which is collected and the information which appears on the credit file – be it the limited information that was on there prior to positive reporting or the expanded information which is now there – this needs to be correct, accurate and up-to-date.”

This inaccurate information will provide a skewed version of an individual’s credit history with every single credit agency in Australia, Trimarchi said.

“It’s not about the volume of information going in. It’s the accuracy of that information that needs to be looked at.”

The increased volume of information has another potential impact on consumers, he added, in that minor financial missteps will now be recorded.

“Even if a loan is in arrears for a few days, it still has capacity to be recorded on the credit file. It certainly does help the banks in determining creditworthiness but at the same time it will make it more difficult for a client who’s gone through a little bit of an upheaval in life … that puts them behind by two or three or four weeks before they catch up.”

How lenders will view these cases in future is yet to be determined, he said.

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COMMENTS

  • by OzBoy 20/10/2017 8:46:37 AM

    True and correct however I think the major issue is the time it takes to fix these incorrect listings. There will always be wrong information it's the system around how this is corrected that needs urgent attention. The issue needs to be put back on the lister to prove their listing in a 72 hour time frame not a 12 month we will get to it when it suits us. If the listing is proven to have cost the client financially then they should be compensated.

  • by Country Broker 20/10/2017 9:25:15 AM

    This is spot on , The real issue is Mis reporting and generally in accurate information , if the federal government is so in favour there needs to be a strict enforcement and fine policy for all people who wrongly list and refuse to remove within 72 hours , this also needs to involve the reporting agencies themselves , and the need for them to clean up their information quickly when its proved to be wrong.

    These fines and penalties MUST be substantial and enforced, probably $10,000 plus for a first offence. This government seems to be saying we stand up for consumers , this needs to happen. I am tired as a broker of having to assist client with wrong listings.

  • by NotFakeNews 20/10/2017 9:44:06 AM

    While providing accurate information is important, almost none of the information in this article is correct.

    - Credit providers are under a duty to ensure the information they provide is correct and this can be enforced by OAIC as well as consumers themselves. Consumers don't put up with incorrect listings on their credit card - they need to pay attention to their credit file too.
    - Amounts overdue by a few days aren't eligible to be reported as late repayments. Arrears need to be beyond the grace period of 14 days overdue.
    - Just because someone is late with payment won't result in them not getting credit. Lenders still want to lend.