Credit reporting draft bill under fire
Complaints-handling procedures in the exposure draft of new credit reporting legislation came in for sustained criticism at a Senate Committee hearing in Sydney yesterday. This was along with concerns about limits on the use of de-identified data, and calls for substantiation requirements.
The Senate Finance and Public Administration Committee held a public hearing in Sydney, as part of its review of the Government-proposed overhaul of the credit reporting rules in the Privacy Act.
The changes stem from a 2007 report of the Australian Law Reform Commission, which recommended that Australia move from a negative credit reporting regime to comprehensive (or positive) reporting. This involves allowing more information to be added to credit files, such as active credit accounts, the date of opening and closing of accounts, account credit limits and credit repayment history.
Views on complaints-handling appear to be the most difficult to reconcile.
Representatives for the Australasian Retail Credit Association and the Australian Bankers Association, along with the Communications Alliance, which represents telecommunications providers, said the legislation needed to work in conjunction with existing industry specific complaints-handling obligations, rather than adding another process.
The need to align the various industry complaints-handling processes was acknowledged by Chris Gration, head of external relations for credit reporting agency Veda Advantage. But, with the varied industries captured by the legislation currently being subject to different rules, this will be challenging for law-makers.
Consumer groups raised concerns that the proposed complaints-handling process would be more onerous for consumers.
Carolyn Bond, co-chief executive officer of the Consumer Action Legal Centre, said that "the bill forces people to go two steps", by requiring that consumers lodge a complaint again if a lender or reporting agency disputes the initial complaint.
Lenders and credit agencies both raised concerns that changes to the Act prohibiting the disclosure by credit reporting agencies of de-identified information would impact negatively on lenders. De-identified information is aggregated information about, for example, a borrower's gender, earning capacity and postcode, and does not identify individual borrowers.
David Fodor, chief credit officer for personal banking and risk with the National Australia Bank, said that the sharing of "de-identified data was essential to the innovation of lending practice".
Damian Karmelich, director of marketing and corporate affairs for Dun and Bradstreet, said the credit reporting agency also supported the removal of the prohibition on sharing de-identified information.
Two consumer groups, the Consumer Action Law Centre and the New South Wales Consumer Credit Legal Centre, raised concerns that requirements for credit reporting agencies to substantiate credit listings (as included in the Australian Law Reform Commission's recommendations) had not been included in the draft legislation.
In addition to specific issues raised in submissions, it is evident that lenders and consumer groups remain at odds on the effects the positive credit reporting provisions in the legislation will have on lending practices.
Carlo Cataldo, the chair of ARCA, said that access to positive reporting data "will improve the ability to lend responsibly".
Katherine Lane, principal solicitor with the Consumer Credit Legal Centre, acknowledged that "full reporting of liabilities is a great help", but said that "positive repayment information is a small matter in the context of overall responsible lending".
There was general consensus among the groups attending that the legislation was complex and should aim for greater simplicity, and that there was a need for a co-ordinated approach between industry, government and consumer groups to educate consumers appropriately.