The Office of the Australian Information Commissioner has proposed introducing a category of “soft inquiries” into the Credit Reporting Code, so that consumers can shop around for credit and get quotes without these inquiries being included in credit reports.
This is one of the key proposals in the OAIC’s review of the Credit Reporting Code, which was released yesterday. It includes more than 40 proposals.
The OAIC has also proposed that the process for getting access to credit reports and making corrections be streamlined, with the industry providing better guidance to explain consumers’ rights.
And the OAIC said it would raise with government the issue of how emerging finance products, such as buy now pay later, interact with the credit reporting system.
On the issue of soft inquiries, under current arrangements inquiries can be recorded on an individual’s credit report. The rationale for this is that a large number of credit inquiries might indicate a consumer with debt problems.
However, credit providers receive a lot of complaints from consumers, who feel that the recording of inquiries unfairly impacts their creditworthiness and should be removed. The OAIC said credit inquiry complaints were increasing and were a significant part of overall credit reporting disputes.
The OAIC proposes to make a distinction between a soft and a hard inquiry, so that:• a soft inquiry, which is not recorded in a credit report, is where a consumer is shopping around and seeking quotes for a credit product, or finding out if they qualify for a product; and• a hard inquiry, which is recorded in a credit report, is where a consumer submits an application for credit.
The Australian Retail Credit Association said it supports the introduction of a soft inquiry category.
ARCA chief executive Elsa Markula said: “This is a key area of consumer reform. It will enable consumers to shop around to understand the pricing of credit products, without any record being made on their consumer report. It will bring about greater choice.”
The OAIC has identified an anomaly in the Credit Reporting Code that relates to the correction of information. An individual can request a correction of default information if it relates to an overdue payment that occurred because of “unavoidable consequences or circumstances beyond the individual’s control”.
But this right does not extend to repayment history information (reporting of late payments).
The OAIC plans to amend the code to expand the categories of information that can be corrected. And it plans to include domestic violence as an example of circumstances beyond the individual’s control to allow credit providers not to report information about overdue payments.
It will also raise with government a proposal that credit providers must notify an individual when they disclose repayments history information relating to missed payments.
On the issue of streamlining corrections, the current arrangement is that an individual has to go through a separate correction process for each incorrect item listed in their credit report. Sometimes the corrections involve fraud and abuse, which make the process more difficult.
The OAIC proposes to amend the code to introduce a