Government adopts ALRC credit reporting recommendations

The Australian government will introduce five new pieces of data into consumer credit reports, adopting all the recommendations of the Australian Law Reform Commission for a more comprehensive reporting system.

Cabinet Secretary and Special Minister of State Joe Ludwig yesterday released the government's response to last year's ALRC review of the Privacy Act, which includes credit reporting.

The timetable is for the new credit reporting rules to be in force by January 2011 to coincide with the implementation of the responsible lending provisions of the National Consumer Credit Protection Bill.

The ALRC recommended that four new pieces of information be added to credit files: the type of each current credit account (mortgage, credit card, personal loan and so on); the date on which each current credit card account was opened; the credit limit of each account; and the date on which each account was closed.

It also recommended that the government allow credit reports to include a fifth additional piece of data - payment records - only if it was satisfied "there is an adequate framework imposing responsible lending obligations in Commonwealth, state and territory legislation."

The paper released yesterday says: "To address privacy and consumer concerns around comprehensive credit reporting, repayment history will not be available until new responsible lending obligations are in place. These new obligations are proposed under the National Consumer Credit Protection Bill 2009."

Under the existing negative credit reporting model an individual's credit file contains name, address, employer details and a record of credit applications made by the person over the past five years. The file also includes information about defaults (payments overdue by 60 days or more) and the date any defaults were paid.

Since the release of the ALRC report in August last year sections of the finance industry have continued to lobby government for even more data inclusions, but yesterday everyone was saying they were pleased with the outcome.

Dun & Bradstreet Australia chief executive Christine Christian said: "This is a good outcome. More information allows lenders to make better credit decisions."

"It will expand the market for credit, it will increase competition and it will change behaviour."

Veda Advantage spokesman Matthew Strasburg said Veda was happy with the outcome but it would recommend to government that it bring the credit reporting changes forward by making amendments to the existing Privacy Act so that the reforms would not be caught up in any controversy over other changes to the Privacy Act.

Yesterday's government paper outlined a number of other changes to the credit reporting system. The industry will be required to develop a credit reporting code with standards and a compliance regime.

Participants will be required to join an external dispute resolution scheme.

New legislation will prohibit direct marketing using credit information but will permit pre-screening of direct marketing lists to remove adverse credit risks.