Mandatory Comprehensive Credit Reporting law passes

The National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 has finally passed both houses of Parliament.

Comprehensive Credit Reporting (CCR) expands the information banks must report to credit agencies about the credit history of their customers. 

It means lenders will have more detail and more context, including positive financial behaviour.

Previously, a credit report was only required to have credit inquiries, defaults and serious infringements.

The additional information shared under the mandatory regime includes account open and closed dates, types of credit, credit limits, financial hardship information and up to 24 months of repayment history information.

The law, which was first introduced into Parliament in December 2019 to improve take-up of the regime (following minimal voluntary take-up of the regime), was passed by the House of Representatives in February 2020 and sent to Senate that month in the expectation that the law would pass and the mandatory regime would start in April 2021.

However, members of Senate had proposed a number of amendments to the bill and a consultation on the amendments was launched later that month.

A string of delays – including those due to the COVID-19 pandemic and the closure of Parliament for the summer holidays – meant that the final Senate debate only took place on Wednesday (3 February 2021), with the committee agreeing on a range of amendments updating the law.

As such, the law passed both houses on Wednesday.

What the updated bill includes

The amendments to the National Consumer Credit Protection Amendment (Mandatory Credit Reporting and Other Measures) Bill 2019 include:

• Delaying the start of the mandatory comprehensive credit reporting regime from its original date of 1 April 2020 to 1 July 2021;
• Delaying the financial hardship information reporting framework from 1 April 2021 to 1 July 2022;
• Bringing in new protections around financial hardship so that credit reporting bodies are prevented from disclosing financial hardship information about an individual in certain situations. This includes preventing them from disclosing to a credit provider to either collect payments that are overdue or assess the individual’s suitability as a guarantor about an application for credit made by another person; or to a mortgage insurer to assess the risk of the individual defaulting on mortgage credit for which the mortgage insurer has provided insurance to a credit provider;
• Enabling a consumer to access their credit reporting information that is held by a credit reporting body free of charge every three months (previously every 12 months);
• Ensuring credit reporting bodies provide consumers with the following if they are instructed by the consumer that they wish to access their credit reporting information: their rating on a credit score scale (including if this requires the credit reporting body to generate the rating); information that explains what credit information is held by the body that was used to derive the rating; an explanation about the relative weighting of the credit information used to the derive the rating; and information about the credit score scale used by the body, including how the consumer’s rating relates to the other ratings on the scale.

The amendments mean that large banks will need to supply credit information on 50 per cent of the consumer credit accounts within the banking group to all credit reporting bodies that they had a contract with on 2 November 2017 by 28 September 2021. 

By 28 September 2022, large ADIs must supply credit information on the remaining accounts, including those that opened after 1 July 2021 and those held by subsidiaries of the large ADI, to the same credit reporting bodies as the first bulk supply.

The Treasurer and Assistant Treasurer both welcomed the passage of the bill, stating in a joint release: “Consumers and small business will have better access to finance following the passage through Parliament of the Morrison government’s reforms to the Mandatory Comprehensive Credit Reporting (CCR) Regime.

“The strengthened regime will deliver benefits to lenders and borrowers and drive competition in the lending market while preserving and enhancing important security and consumer protections.

“Australia’s largest banks will now be required to participate fully in the credit reporting system in order to provide more Australians with better access to credit. With a deeper, richer set of credit data, consumers will be able to demonstrate their credit worthiness and seek a better deal, while lenders will have greater opportunity to compete for customers with positive credit histories.”

Noting that the commencement of the financial hardship information will begin on 1 July 2022, they added: “Consumers experiencing financial difficulty can now better demonstrate their creditworthiness through a more accurate reporting of their circumstances. A new category of credit information will also enable financial hardship information to be reported alongside repayment history. Lenders will only have access to this hardship information in situations where the consumer is seeking to access new credit, or the consumer agrees to the information being provided.”

Treasurer Josh Frydenberg and Assistant Treasurer Michael Sukkar concluded: "The scheme also offers consumers greater financial transparency and protections, following additional amendments made by the government. Consumers will be able to access their credit files for free every three months. Credit reporting bodies will also be mandated to share a consumer’s credit score range, and an explanation of the input information that determines the credit score.

“By improving transparency and access to data in the financial services sector, the Morrison government continues to build a stronger and more competitive economy.”

The Australian Banking Association (ABA) has also welcomed the passage of the new mandatory regime through Parliament.

“Households and small businesses will get better access to finance as a result of these welcome changes,” ABA CEO Anna Bligh said.

“More information is better for customers as it gives lenders a more comprehensive picture of a customer’s financial situation…

“Having more information on their credit history means customers will have greater choice and more opportunity,” she said.

“This is also good news for customers experiencing financial difficulty. Now, more context will help ensure customers’ credit histories are more accurate and reliable,” she said.

The ABA outlined that banks already have well-established programs to assist customers experiencing financial difficulty (for example, measures to help them manage their loan repayments), adding that “there are strong benefits in having more information on a customer’s credit report, especially by demonstrating a customer is working with their bank to get back on their feet.”

[Related: Treasurer insists CCR will boost access to credit]