The Australian Banking Association and members banks have issued new credit report factsheets to assist consumers and financial counsellors with changes to credit reporting rules.
The ABA’s message to consumers is that to protect their credit history, they need to get in touch with their bank if they are experiencing financial difficulty and believe they will not be able to make repayments on time.
Following a variation to the Credit Reporting Code that took effect on July 1, credit reporting bodies are permitted to collect, use, disclose and retain financial hardship information.
A financial hardship arrangement is defined as an agreement that defers or reduces the obligations of a debtor for a temporary period.
The change was made to give credit providers a fuller picture of a consumer’s financial situation.
The Australian Retail Credit Association said the changes will “safeguard” consumer’s repayment histories because credit files will reflect the revised repayment arrangement and not the original contract. There will be no risk of the credit provider inadvertently listing a late payment.
The ABA said the change will clear up a lack of consistency in reporting arrangements. “Prior to July 1, a consumer’s credit report might have shown that they have missed repayments during a hardship arrangement, even if those missed or reduced payments were agreed as part of a financial hardship arrangement with their lender.
“Alternatively, some lenders ceased reporting a customer’s repayment history during a financial hardship arrangement. The lack of consistency across lenders led to confusion for consumers and banks alike.”
ABA chief executive Anna Bligh said in a statement: “We all may experience financial hardship at some point and these factsheets are just one tool in Australian banks’ toolkit of offerings to help customers get back on track when they need it, with respect to their finance.”
Banks have lifted their game when it comes to dealing with hardship. The Australian Financial Complaints Authority reported last week that complaints involving financial difficulty fell 14 per cent in the year to June.
AFCA chief executive David Locke said this reduction reflected the work banks have done to improve the way they handle hardship applications.
The consumer factsheet includes information about where people can get information and help, what their bank will do to assist them, details of what will go on a credit report and information about how to make a complaint.
The counsellor factsheet has more detailed information about why credit reports have changed and about the processes for customer interaction with their bank.