The addition of more detailed consumer data, improved regulation of credit repair services, increased credit reporting participation from lenders, telecommunications and utility providers, and Buy Now Pay Later services are all needed if Australia's credit reporting system is to be effectively modernised, the Australian Retail Credit Association says.
Heidi Richards, a former APRA member is undertaking the Review of the Credit Reporting Framework, which covers Part IIIA of the Privacy Act.
Australia’s credit reporting system “plays a pivotal role in the nation's economic infrastructure” ARCA said in its submission.
“By incorporating positive data, such as liabilities and repayments, millions of Australians have benefitted from streamlined application processes and enhanced support from lenders during financial difficulties. The vast majority of Australians have also been rewarded for their positive behaviour with improved credit scores and better access to credit on more competitive terms.”
ARCA said that including more data, such as account balance and more extensive repayment information, “could improve the usefulness of credit scores, empower better lending decisions, and support further financial inclusion.”
“While the credit reporting system is working well, it could do so much more to help consumers access credit on competitive terms,” said Elsa Markula, ARCA’s CEO.
“Adding more data to the system - especially the kinds of data that are commonplace throughout the world - like account balance and repayments - would improve outcomes for consumers.”
The submission notes that the introduction of the financial hardship reporting reforms has proven beneficial and feedback indicates it does not hinder future credit access.
“Lenders do not treat past financial hardship as a black mark preventing further lending. Rather, it’s a prompt to make sure they understand the consumer’s situation fully and make a tailored, informed decision.”
The submission also suggested the need for robust regulation of credit repair services, warning that current behaviour suggests to consumers that their information is inherently negative - something which is simply not true.
"Credit repair firms offer to fix, clean or repair a credit report for a fee, but consumers shouldn't be paying anyone to correct information: this can be done for free.
“The licensing of credit repair firms hasn't improved the conduct of this sector, and stricter regulation is needed.”
The Review is set to conclude by 1 October 2024.