The treatment of joint accounts and the sensitive topic of financial abuse feature in an overhaul of the Credit Reporting Code.
The Australian Retail Credit Association yesterday published proposed changes to the Code and is now undertaking public consultation.
The Australian Banking Association this morning also announced it has commissioned an independent review of the Banking Code of Practice and the review is now calling for submissions.
The National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Act 2021 was passed in February 2021 and provided for a new form of ‘financial hardship information’ to be included in the credit reporting system from 1 July 2022.
The law also made other changes, including allowance for ‘non-participating credit providers’ and a requirement for credit reporting bodies to give individuals their ‘credit rating’.
Aside from those individuals who may self-identify and request hardship assistance, there is also an expectation that a credit provider will have processes in place that seek to understand the reasons behind someone experiencing payment difficulty, and whether the borrower should be assessed for ‘hardship’ assistance.
It also seems reasonable to expect that the credit provider’s focus on this would increase the longer that the individual will be overdue.
“We also recognise that the legislative intent was to allow for flexibility rather than prescription, so that depending on specific circumstances any particular arrangement could be considered as a financial hardship arrangement,” the ARCA said.
“Given financial hardship arrangements “will be disclosed at the account level [and] will appear on the credit reports of all account holders … this raises the question of whether the agreement of one or all account holders is needed to enter an FHA,” ARCA ask in the consultation document.
“This is a complex issue, and the requirements of contract law and the NCC are relevant.
“We understand that the Australian Financial Complaint Authority’s (AFCA) expectation is that a credit provider should not refuse to agree to a financial hardship arrangement requested by one borrower simply because the other borrower(s) have not agreed or consented to the form of assistance.
“We believe this expectation is shared by other stakeholders, including ASIC and consumer advocates,” ARCA said.
To provide clarity, and to give effect to AFCA’s expectation, ARCA have proposed that an FHA “may be formed at the request of, and with the agreement of, one borrower only.”
Inevitably, this means “that the introduction of FHI into the credit reporting system may raise concerns in relation to domestic abuse [including] economic coercion and [actual, violent] abuse.”
ARCA said: “We acknowledge the above ‘triggering’ risk and have offered to work with relevant stakeholders to understand the size of the risk and discuss strategies to mitigate it.”
The ABA's review of the BCOP is being undertaken by Mike Callaghan, the current chair of the Commonwealth Grants Commission.
The review is due to report its findings by the end of November 2021.