ACCC gives comprehensive credit reporting rules the nod

The Australian Competition and Consumer Commission has issued a draft determination authorising the rules for participants in the comprehensive credit reporting system.

The proposed rules, the Principles of Reciprocity and Data Exchange, were drawn up by the Australian Retail Credit Association and submitted to the ACCC in February. They have been controversial, with the two largest credit bureau operators arguing that there were serious flaws in ARCA's proposals.

The ACCC acknowledged the industry's concerns in a statement on Friday. However, it said detriments arising from the rules would be more than offset by the benefits arising from the industry sharing consumer credit information.

Under the comprehensive credit reporting changes introduced last year, the range of data that credit providers can provide to credit reporting bureaus has been expanded to cover such things as a borrower's repayment history.

The industry's self-regulatory body, ARCA, developed a Credit Reporting Privacy Code and a data standard. The final piece of the puzzle is the PRDE - the system's operating rules.

The main element of the PRDE is the reciprocity obligation, where signatories to the comprehensive scheme (which is voluntary) agree that only those credit providers supplying comprehensive data can have access to comprehensive data.

Another important element of the PRDE is the consistency obligation, which says that credit providers must deal with bureaus on a consistent basis.

A third key element is that signatories accept that sanctions apply for non-compliance.

Australia's biggest consumer credit bureau operator, Veda, said it was opposed to some of the more prescriptive elements of the PRDE.

Clause 15 requires that a subscriber credit provider engaging in comprehensive reporting supply the same level of data to all bureaus with which it has service agreements.

Veda submissions said: "The consistency provisions of the PRDE, which compel credit providers to contribute data at the same level to all credit reporting bureaus they have a service agreement with, may mean that small credit providers do not participate in comprehensive data sharing at all."

The Customer Owned Banking Association was also concerned about the consistency obligation. It said that Clause 15 would impose additional costs on small credit providers. Some small lenders have a data interface with one bureau and use a portal for access to a second back-up bureau.

COBA said: "These credit providers would be unable to participate in comprehensive credit reporting without incurring significant development costs to establish additional interfaces."

More generally, Veda said ARCA's approach to rules was too prescriptive and would benefit from moving to the more principles-based approach that applied in New Zealand and the United Kingdom.

Consumer groups criticised the PRDE for lacking clear guidelines for dealing with financial hardship and defaults.

On the reciprocity, consistency and enforceability issues, the ACCC said: "Credit providers need adequate assurance in a framework for sharing of their commercially valuable consumer credit information in order to overcome the free rider concern that other credit providers will access that information without also contributing their own information.

"The consistency provisions are likely to facilitate a more complete exchange of information between credit providers and each credit reporting body, leading to increased competition between credit reporting bodies and between credit providers."

On the consumer group concerns, the ACCC said the issue needed to be resolved.

The ACCC has set a deadline of August 14 for submissions in response to its draft determination.