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The draft legislation for mandatory comprehensive credit reporting (CCR), which was released in February, aims to address the “information asymmetry” that currently gives consumers more access to their credit risk than the credit provider.
Australian Treasurer Scott Morrison previously said that the CCR scheme could result in “better deals” for customers, as it will enable lenders to access both positive and negative credit reports, and therefore price loans accordingly.
While the government’s new mandate is expected to benefit customers in the long run, especially those with a good credit history, ABA CEO Anna Bligh said that it is important that the reforms are fair for all Australians, including those who have fallen into financial hardship due to unforeseen circumstances.
As the new mandate will require banks to provide a customer’s full credit history, the banking industry advocacy group has called on the government to ensure that banks are able to provide detailed explanations of a customer’s circumstances, especially if they’ve missed repayments in the past.
“There needs to be an easy way to flag this in a customer’s history to ensure they aren’t unfairly denied access to credit when they have ticked all the right boxes by working with their bank when encountering problems paying back their debts,” Ms Bligh said.
“People can fall into financial hardship for many reasons, such as natural disasters, prolonged drought, the loss of a job or the death of a partner.”
Matthew Santosa, head of broker and marketing at fintech company MoneyPlace, said that once CCR becomes mainstream, the industry will see “the network effect in action where more borrowers will be able to get a better deal across more lenders”.
“For some prospective borrowers, the extra data available to lenders under positive reporting increases their chance of being considered for a loan they would normally be knocked back for,” Mr Santosa said in January.
While a number of smaller lenders are already participating in the CCR scheme, the National Australia Bank last month became the first major bank to begin utilising CCR, rolling out the new system for personal loans, credit cards and overdrafts, with plans to extend it to other products.
“Under comprehensive credit reporting, we now have a more holistic picture of a customer’s credit situation, so we’re better able to make sure our customers receive the right type and amount of credit for their individual circumstances,” NAB COO Antony Cahill said in February.
“We believe CCR is good for competition and will mean better outcomes for customers.”
[Related: Why positive credit reporting is such a big deal for our industry]
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