Repayment deferrals will not impact credit reports
The banking industry is changing its credit reporting protocol as part of its COVID-19 response. Under an agreement between the Australian Banking Association and consumer groups and community legal centres, lenders that grant borrowers a repayment deferral will not file a missed payment or hardship report with a credit bureau.The ABA announced that any borrower granted a repayment deferral on any credit product would not have their credit report affected as a result."The industry has agreed to a new approach to credit reporting through the COVID-19 crisis," the ABA said.A Commonwealth Bank spokesperson confirmed the new approach would also apply to all deferrals, including any granted before the ABA announcement yesterday.However, whether this approach will extend beyond ABA member banks is not clear.Consumer Action Law Centre chief executive Gerard Brody said: "It's important now that all lenders, including non-bank lenders and other finance companies, similarly commit to ensuring people's credit reports are not negatively affected at this time."We have been talking to the other industry groups. At the moment they are leaving it to the ABA," Brody said.For customers who are already behind with their repayments when they are granted a deferral due to COVID-19, the new approach prescribes that banks will not report any repayment history information for the duration of the deferral period. "When the deferral payment period has ended, banks will then determine how to report the repayment history information," the ABA said.Consumer Action Law Centre released a statement saying "consumer groups welcome the announcement by the ABA. Importantly, this approach will apply across the board to all consumer debt, including mortgages, personal loans and credit cards."The chief executive of Financial Counselling Australia, Fiona Guthrie, said the ABA's new approach should remain in place when the crisis is over."People are put off asking for hardship variations if they know it will hurt their credit report. No one chooses to experience financial hardship and shouldn't be punished for it," Guthrie said.