Time ripe for comprehensive credit reporting: ABA

by BN24 Aug 2009

If the National Consumer Credit Protection Bill 2009 will include responsible lending obligations, then according to The Australian Bankers' Association (ABA), more comprehensive credit reporting must be put in place at the same time.

David Bell and Ian Gilbert, respectively ABA's chief executive and director of retail regulatory policy, made this point to the Senate Economics Committee in Sydney.

The committee is inquiring into the National Consumer Credit Protection (NCCP) Bill 2009.

This NCCP bill implements a decision by the Council of Australian Governments to replace state-based legislation with a national regime for consumer credit regulation and oversight - including licensing and dispute resolution.

Low default rates demonstrate that banks have applied responsible consumer credit lending practices, but according to Bell, particularly in the case of credit card products there appeared to be "a lot of community misunderstanding".

"The practice of banks offering credit card limit increases to their existing customers is a case in point. These offers are made to customers who have shown an ongoing sound level of performance with their credit card," he said.

He added that comprehensive credit reporting would provide the option to access credit limits. However, that disclosure of credit balances would give the credit provider more information about customers' current levels of commitment.

In 2008, the Australian Law Reform Commission (ALRC) recommended that the current credit reporting regulation should be expanded to include a range of additional features.

The ALRC recognised that more comprehensive credit reporting could assist credit providers to practice responsible lending.

The ABA believes that the timing (for the introduction of more comprehensive credit reporting) should be aligned with the start of the responsible lending obligations for banks under the Bill in 2011.

Related Story

Federal inquiry backs positive credit scores - Australia's negative credit reporting model will be reformed following the release of recommendations from the federal inquiry into competition in the banking and non-banking sector, carried out by the House Economics Committee.


  • by SteveOZ 24/08/2009 8:24:44 PM

    Crickey. I saw this in the US and it was pretty awesome. They know EVERYTHING! Credit card balances, late Gym membership fees, late utility bill payments, you name it. It is a good idea but like all good ideas it will be corrupted. Once this is in, it will be rate for risk, which makes sense, but looking back it didn't stop bad debts in the US, or protect anyone. And you can bet your bottom dollar the best rates will start where the are now and head North. There is nothing in this for the consumer, but everything in it for the banks. Oh well....we should be used to that by now!

  • by Barry Stamp 24/08/2009 10:25:47 PM

    Consumers are paying the price at the moment for not being judged on positive credit history - for example, our credit card costs are high when compared to the UK or USA where annual fees went out the window long ago. At the moment the Australian credit reference agencies hold so little information, you have to bear in mind that to get positive reporting going, it will take IT development time of a couple of years and then five years longer to build up a database of credit history - and that assumes that Australia's credit industry adopts the same format for reporting as is used in the UK and USA (basically the same, both stemming from the old TRW data format) - and adopts the same shared data rules. To give just one example of the sort of issue I'm talking about - the UK's Rules of Reciprocity, which governs how shared data can be used, took about 5 years to be agreed within the credit industry, so there's a lot of work to do. For everyone's sake I'd like to see this initiative live in 2011 but somehow, I don't think so. Finally we also need a paradigm shift in allowing consumers access to credit reports to check for accuracy as there is likely to be a lot of cynicism around. The current processes are good in one respect, they are free offline at least, but we need a big kick to bring us up to speed to match the online credit reports that consumers have instant access to in other developed countries.