A non-bank has said Australia has a “great opportunity” to adapt to comprehensive credit reporting (CCR).
In New Zealand CCR went live in circa 2012 with minimal lender take up. The clear learning from the NZ roll out was that there was minimal communication to the broker market and the general public; this created an environment of uncertainty for anyone engaging in credit consumption.
Alternative lender Pepper Money is providing tools and educational materials to make sure they play their part to protect Australians from a repeat of the NZ rollout.
CEO Mario Rehayem said, “If there’s one learning that we really need to embrace, it’s early adoption by way of communication and education.
“I think brokers need to ramp up their knowledge and understanding of CCR and how that’s going to change the discussions and the preliminary assessment they carry out with their customer.
For brokers who are unsure how CCR affects them and their relationship with their customers, Mario explains what the opportunity is and how to embrace it.
He said, “First and foremost brokers should get their own credit report and understand the mechanics behind it, what influences it, and really educate themselves because this is going to be part of their everyday interaction with their customer.
“Once the brokers have a much better understanding of what makes up a credit report, they can share this knowledge with their customers. This is a golden opportunity for brokers to position themselves as an expert in this field and be in a position to add value to their customers which can play a huge part in setting up their customers for financial success.
"I would proactively approach my trail book or my customer base and start to prepare them for the CCR roll out. I see this as a way of adding real value and differentiation to what’s available from others in the industry.
“It’s an easy thing to do, it’s a cost effective thing to do. At the same time, that’s what brokers are there for, to add value to their customers, not just to originate a loan. So this is a great opportunity for brokers to highlight how important a mortgage broker is to this ecosystem.”
The introduction of CCR will allow for a swapset effect, where those who may have been approved for mainstream lending in the past may now be declined, and those who may have been declined in the past may now be approved.
This is because the lenders will have much more comprehensive information to base their decision on.
For brokers, this means many of their customers who are expecting a mainstream loan may now require an alternative solution through an alternative lender.
Rehayem said brokers play an important role in managing those expectations and helping those customers.
He said, “There’s this big myth that non-conforming is hard to write. However, it’s not difficult at all - the actual origination process of the loan is identical. The hard part is managing that customer’s expectation, they may have been blindsided and may not have known that they were a higher risk than what the banks wanted.
“It’s different overseas. You speak to people in the US and in the UK and they all know their score and what that does is it takes the pressure off the broker to manage customers’ expectations because the customer already knows their score, so they know what to expect.
“More brokers will be presented with the opportunity to offer an alternative product but under CCR, the conversation becomes a little easier to have with the customer because there’s an independent reference point to start from. That reference point is their CCR score,” Rehayem concluded.