ASIC has adopted a “no-action” position to allow large banks to withhold the reporting of credit information on consumer credit reports “where reporting the information could lead to consumer harm, including where a consumer may be the victim of family violence”.
The regulator’s move follows the implementation of a variation to the Credit Reporting Code from July 1, allowing credit reporting bodies to collect, use, disclose and retain financial hardship information.
While most credit providers supply credit information voluntarily, since June last year “eligible licensees” – authorised deposit-taking institutions with more than A$100 billion of assets – have been required to supply comprehensive information.
ASIC said licensees raised concerns that including certain credit information in the reports of victim-survivors of family violence, such as financial hardship information, “could place those consumers at risk of further harm”.
The regulator said such a situation might be where a victim-survivor holds a loan jointly with their partner, who is the perpetrator of family violence, the victim-survivor might be experiencing hardship and not want their partner to know they have agreed to a financial hardship agreement.
“In this circumstance, ASIC’s position will enable eligible licensees to help the victim-survivor by withholding financial hardship information on their credit report,” ASIC said.
The no-action position is temporary and will be reviewed.
ASIC’s decision challenges the strange assurances by the Australian Retail Credit Association and credit reporting companies that the inclusion of hardship arrangements in credit reports will help “safeguard” and “protect” consumers’ interests.
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.
However, there are clearly risks in disclosing such information. A number of protections were included in the code variation to deal with concerns that the change was too intrusive.
Disclosure of hardship information will be restricted in some circumstances, most notably where a credit provider is seeking to collect overdue payments. The intention of the change is to allow credit providers to use the information when assessing new credit applications.
Credit reporting bodies cannot use hardship information in calculating an individual’s credit score (a credit provider may use the information when calculating an internal score).
Hardship information cannot be accessed by telcos or other non-financial institutions.