Positive credit to stop client 'poor track record'

by Adam Smith23 Feb 2012

The incoming positive credit reporting regime has been touted as a solution to consumers' "poor track record" of self-reporting.

Veda head of legal Olga Ganopolsky has defended the positive credit reporting regimen, saying it will be a "game changer" for both the regulatory environment and lenders' risk assessment practices. Ganopolsky claimed consumers often inaccurately report their credit situation, and argued that the new regime would alleviate this.

"Rightly or wrongly, the research that's been conducted shows that consumers have a very poor track record of self-reporting on one's liabilities," she said.

Ganopolsky pointed to research showing that consumers with poor and clean credit alike often misrepresent their credit history.

"When research is done on bankrupts, the astonishing results were that more than 95% of people in bankruptcy were applying for credit virtually on the eve of bankruptcy. A lot of even solid credit individuals don't provide accurate credit information. Just under 20% of people don't accurately report," Ganopolsky said.

In contrast, Ganopolsky argued that the wider array of information available in the new reporting regime will enable lenders to make more informed risk decisions. She claimed the regime carried a "strong link to responsible lending".

Critics of the regime say it violates consumers' privacy  and places the burden of proof on consumers should lenders make a mistake. And though Ganopolsky claimed the regime would enable more responsible lending decisions, NSW Consumer Credit Legal Centre director Karen Cox has pointed out that a positive credit reporting regime existed in the United States during the subprime mortgage crisis.

Related stories:

Veda rebuts credit regimen criticism


  • by Michael Maher - Fair Go Finance 29/02/2012 11:26:09 PM

    Our business, Fair Go Finance, provides personal loans to credit impaired clients, often needing instant access to cash . We rely on the current "negative" reporting system through VEDA to assess the clients application. The comment that "consumers often misrepresent their credit history" is confirmed daily in our business. Consumers do not like to remember nor admit to financial blemishes, human nature is often to only remember the good. That said, I therefore fully support the incoming positive credit reporting system as I believe it will better reflect a clients credit worthiness.