Credit Reports To Provide A Fuller Picture
DEBT and credit agencies could soon have access to more detailed information about people's financial affairs, after a major review of Australia's privacy laws.
Anyone who applies to borrow money or wants a new line of credit could soon have all their credit details made available to the lender.
The new rules are set to allow information about other credit accounts or facilities, even those that are not in default.
This compares with the existing law which only allows access to bad debt or bankruptcy information, known as "negative'' reports.
The proposed expansion of existing credit reporting comes after a two year review of Australia's privacy legislation including the laws surrounding the information banks and credit agencies can collect and store.
The recommendations by the Australian Law Reform Commission (ALRC) aim to help cut the number of loans made to people who can't afford them, which in turn could reduce bad debts.
ALRC president David Weisbrot said the additional information on someone's credit file would help reduce the risks to lenders and credit suppliers.
Several new pieces of information have been proposed to be added to credit files including: type of credit, which lenders, date accounts were opened and closed and the credit limit of each account.
Consumer group, Consumer Action Law Centre welcomed the recommendations but warned the banks and big lenders would try to push the government for even greater disclosure of people's private information.
"The credit reporting recommendations represented a fair, sensible and principled stance in the face of a massive and concerted campaign by the credit industry,'' Consumer Action Law Centre policy director Nicole Rich said.
"Lenders and credit reporting agencies argue that allowing more information to be kept on credit reports would allow them to lend more responsibly but this does not mean they would do so in practice,'' she said.
"We have been concerned for a while that lenders were using people's credit reports not only to assess them for a loan but also to pre-screen them for marketing offers.''
Debt and credit reporting agency Dun & Bradstreet also welcomed the recommendations as helping to provide a more detailed credit reporting system.
"The Australian credit market has changed dramatically over the last decade. The volume of credit applications and range of available products are far greater than ever before but our credit reporting laws have not kept pace,'' D&B chief executive Christine Christian said.
"Lenders need to be able to provide a free flow of credit to consumers and businesses which is based on the most up to date and accurate data,'' Ms Christian, who was also a member of the review, said.
However, not everyone in the finance industry thinks the reforms go far enough and they are calling for even greater disclosure.
Debt agency Veda Advantage spokesman Chris Gration said that bankruptcy levels were at historic highs in Australia and that many people were "clearly worried about access to credit and over-commitment''.
"The proposals fail to provide early warning signs of a person becoming financially stressed.
"It is now up to the government to act to ensure banks have the information required to assess whether consumers are struggling,'' Mr Gration said.
Existing laws allow access to information equivalent to about 11 per cent of the full picture of an individual's financial situation, he said.
The proposed Law Reform Commission changes would boost this snapshot view to about 22 per cent, which was still not adquate, Mr Gration said.
'Negative' reporting was only a small part of the total bad debt situation. About 57 per cent of people declared bankrupt did not have any defaults listed on their credit file in the two years prior to bankruptcy, Mr Gration said.
Although the inclusion of some "positive'' reporting aspects was a step in the right direction, Mr Gration has called for even further reforms.
Veda and other financial institutions still want the Government to introduce account payment histories for the previous 24 months.
This would provide important credit history information and early signals to financial stress such as how often someone has been overdue on a payment or missed a payment in the past.
"Australia is one of only three OECD countries not to have comprehensive credit reports.
"The report doesn't align Australia with world's best practice in credit reporting, meaning Australians -- particularly those families who are struggling -- will suffer.”
Source : http://www.news.com.au